- 1). High dividend yielding stocks aren't all equal, some stocks are simply yielding a high amount for the time being because the share price has fallen very quickly, while others are yielding a lot because they have a huge amount of cash on their balance sheet and they want to reward shareholders.
- 2). What type of sectors typically have stocks that pay high dividend yields? Sectors such as the utilities sector, the consumer non-cyclical sector, as well as energy stocks. Bank stocks also offer high dividend yields most of the time, but right now their dividends are very in question so I am excluding them from the conversation.
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Ask yourself why would these companies pay this high dividend?
What is a dividend that you shouldn't trust? Don't trust a high dividend yielding stock that is losing a large amount of money and is having a difficult time raising capital. If they are having trouble raising capital, why would they pay a huge dividend to shareholders? - 4). What things should you look for in high dividend yielding stocks? Look for stocks with strong free cash flow and a lot of cash on their balance sheet. Look for stocks of companies that have proven themselves over time.
- 5). One of the best things to do is buy into a stock that continues to raise its dividend each year. Each year Standard and Poors releases a list of Dividend Aristocrats which are companies that are raising their dividend consistently. These are great stocks to look toward. I have put a link to this in the resources below.
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Dividends are free money to you
Dividends are a great way to boost your portfolio over time. Dividends provide a nice cushion when the market is going down and extra incentive when the market is going up. Choose wisely and you can profit from high yielding dividend stocks.
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