A New Benchmark for Dividend Stocks

Identifying great dividend stocks is easier said than done. But while there are a variety of factors to consider -- from the size of the company to the regularity of its dividend payouts -- the one that stands out is the dividend yield -- the size of the dividend relative to the price per share. With this in mind, I discuss a readily accessible benchmark you can use to identify quality dividend yields

To determine whether or not a particular dividend yield was sufficiently generous, many investors used to compare it to the risk-free yield on the 10-year treasury bond. For a number of reasons related to the 2008 downturn, however, the yield on the 10-year has dropped so precipitously that it is now effectively meaningless. So what should you use as a benchmark? My recommendation is that you use the rate of inflation, which was 3.4% as of November.

Source: Motley Fool

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