Dividend-Paying Stocks Are Not Created Equal

Companies that pay dividends, and in many cases are raising them, are attracting strong attention amid an otherwise unappetizing market. But a healthy dividend doesn’t necessarily mean the company issuing it is in the best shape, says Standard & Poor’s equity analyst Todd Rosenbluth. “You shouldn’t just pick a stock that pays a dividend, but pick one that has good prospects and that pays dividend,” Rosenbluth said. “There are alternatives out there.”

Dividends remain a key focus of cash flow for large-cap companies, which are sitting on record amounts of cash. At the same time, low interest rates have made bonds less attractive to investors seeking yield. Investors seeking above-average yield should look at telecom services (average yield of 5.4% at the end of July), utilities (4.3%), consumer staples (3.0%) and industrials (2.4%), according to Rosenbluth.

Source: S&P

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