Pick Dividend Stocks Carefully

You’d be hard-pressed to miss the near daily proclamations from gurus and others urging investors to focus on dividend-paying stocks. But not just any dividend-paying stocks. It has to be dividend-paying companies with some sort of unique twist — those that have increased their dividends for 25 straight years, or those that have a high current yield and a long track record of strong dividend growth, or those that make good use of free cash flow, be it on dividends or not.

This week, Sam Stovall, chief investment strategist at Standard & Poor’s Equity Research Services, said investors should pay closer attention to “defensive sectors during the traditionally weak May through October period” and that those who like “owning companies that have consistently increased their cash payouts” should consider the SPDR S&P Dividend ETF (SDY). That ETF, he noted in his weekly commentary, seeks to mimic the composition and performance of the S&P High Yield Aristocrats, which since year-end 1999 has posted a cumulative total return of 164%, besting the S&P 500’s 12% advance.

Source: Market Watch

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