The Secret To Invesyting In Dividend Stocks

By now, it's common knowledge that dividend stocks generally beat their nondividend-paying brethren over the long term. My colleague Morgan Housel offered proof of this by showing that a $1,000 investment in the 10 S&P 500 companies with the highest dividend yields in 1957 would have been worth $1.3 million by 2006. Over the same time period, meanwhile, the same investment in the index overall would have amounted to only $176,000.

To get to the point, then, the secret to successful dividend investing is to identify stocks that are more likely to increase their dividend payouts over time as opposed to decrease them. Focus more on potential yield, as opposed to current yield. The hard way to do this is to screen for stocks according to dividend growth rate and payout ratio, select those that have paid uninterrupted dividends for the longest period of time, and only then consider current yield.

Source: MSNBC

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