Don't put all your dividend stocks in one basket

Dividend-paying stocks offer a powerful combination of current income and growth potential that many investors find extremely attractive right now. But as you look for stocks that pay the top dividends, you have to stay aware of one pitfall that can easily put your entire life savings at risk if you're not careful. Often, investors who gravitate to dividend stocks are on the more conservative side of the investing spectrum. Unlike bold growth investors who prefer companies that reinvest every spare penny back into their businesses to grow as quickly as possible, dividend-seeking investors look at the tangible return of cash to shareholders on a regular basis as a safety net against rash corporate action or even outright fraud. In that sense, some associate dividend stocks with safety.

As you look for the best dividend-paying stocks, it's important to keep your overall portfolio diversified. By being aware of the dangers of concentrated risk that the most popular and highest-yielding dividend stocks pose to your investments, you'll be able to mix and match from a wide array of different industries and sectors to keep your portfolio as safe as you can.

Source: Motley Fool

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