Dividends To Avoid

Sometimes investors are easily attracted to high dividend yields and they immediately add those stocks to compliment their income portfolios. The fallacy in such a strategy is that the full story behind the stock is often not explored. There could be many different reasons why some companies currently support substantial dividend yields, and these reasons must be analyzed prior to purchasing a stock.

Rather than just looking at the dividend value, investors must take other quantitative and qualitative factors into consideration to determine if the yield is sustainable. Companies that have an unreasonable payout ratio may turn out to be a good investment if their situation improves. However, investors must look beyond just the dividend. (These five qualitative measures allow investors to draw conclusions about a corporation that are not apparent on the balance sheet.

Source: Investopedia

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