Where High-Yield Stocks Come From?

Storks don’t deliver nice, healthy, fat-dividend stocks to mothers and fathers. High-yielding dividend stocks are not instantaneously created, and only a small number of them grow their dividends with “yield integrity,” a property I cooked up to identify the next responsible generation of high yielding stocks.

I’m a fan of dividend stocks, but I don’t necessarily rule out stocks that pay low dividends either—especially if I think they have potential to raise their dividend. Instead of only buying today’s top yielders, why not try to find low payers that may pay out later in the cycle? There is a much greater chance that such stocks may be underfollowed, because their low yield slips under a yield hog’s radar. They would “screen out” of a typical stock screen for high dividends, but what if some of those stocks are the next big dividend payers? Think of the extra value of getting in before everyone else recognizes the potential for dividend growth.

Source: Forbes

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