With Dividend Stocks, Go Big or Go Home

When investing in dividend stocks, reach for the companies that pay the highest yields. That’s one thing you are almost certain to never hear when talking to dividend-stock pros and market watchers with a favorable disposition towards dividend payers, as we did for our piece this morning on dividends. Instead, talk to the pro-dividend crowd, and the line you are most likely to hear again and again is: Focus on companies that are likely to increase their dividends, not the ones that are already paying high yields.

There is an elegant logic behind this. Companies that are raising their dividend are watching their earnings grow, and expressing a confidence that they can keep that profits growth steady. At the same time, the companies are exercising discipline in not blowing those profits on, say, acquisitions of questionable merit.

Source: Wall Street Journal

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