Best Dividend Stocks
This is not really stock trading. A dividend is a payment issued by a company to distribute to shareholders. When a company becomes very profitable and stable, its leaders may decide to pass along some of the profits to its shareholders. For the company, the decision to pay a dividend is important. It communicates to stock holders that it's affairs are going well, that it has sufficient funds to reinvest in its operations and to reward shareholders for this. These stocks are also called Income Stocks. Stocks purchased for income tend to be those of larger, more established Large Cap or Blue Chip stocks, that can afford to share their profits directly with shareholders. Investors who are interested in making decent returns from their investments without having to absorb as much risk as Small Cap stocks or Growth stock, are more likely to par-take in Dividend stock investing because of the presumed stability of the companies behind them. By investing in dividend stock for income, you are investing in more established companies that would be more likely to survive even during difficult economic times. And when good times roll around, your investment could increase in value just as well as a smaller Growth stock. How do you find the best Dividend Stocks? By studying the company fundamentals, and determine the percentage yield that your investment will earn for you. Just as if you were to invest your money in a bank account. So if you purchased MicroSoft share at $100, and their annual dividend payout is $5 per share, your dividend yield on this investment would be 5% ($5 divided by $100 = .05 x 100 = 5%).
Morningstar's formula for investing success is simple: Provide you with powerful tools for narrowing the field of stocks and funds down to the very best.
While the investor who seeks to profit from capital gains growth has little basis for comparison between growth stock and other investments because of the unpredictability of that growth, the income stock-minded investor can compare the dividend yield offered by such investments as bonds, bank accounts, money markets etc. If you purchase a stock that offers you a dividend yield of 5%, you are better off here than in a Money Market fund offering 2%. Add to that the fact that with stocks you alway have the possibility of capital appreciation and you could be looking at a very nice capital gain as well. Better yet, Morningstar Dividend Investor Instead, they seek out superior total returns by investing in dividend-paying stocks with dividend growth and price appreciation potential. They aim to realize 10%-12% annual returns over any three- to five-year horizon. That return consists of a 3%-5% yield, 3%-5% (or greater) dividend growth, and 2%-4% from excess capital gains. In each issue of Morningstar Dividend Investor, you are offered sound advice on the long-term investment of your capital with stock dividends as the guide. They examine the fundamentals, asking three basic questions of each stock to build an investment case from the dividend up: 1. Does this stock offer above-average income potential during the next three to five years? 2. Can it provide a combination of dividend yield and dividend growth in the 10%-12% range per year? 3. And does it provide an acceptable margin of safety? You can benefit from Morningstar's dividend strategy with a subscription to Morningstar Dividend Investor.
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