Earnings Basket: Evaluation Criteria for High-Dividend Stocks
Prudent investors often prefer high-dividend stocks because companies that pay dividends consistently for several years tend to have robust operations and provide steady cash flow returns.
So how to identify high-dividend companies? We can examine their dividend payouts and their fundamentals.
Speaking of dividends, some investors focus solely on dividend yield, assuming higher yields are better. However, excessively high yields may be an attempt to boost a falling stock price or driven by a company's temporary profits in a cyclical boom. But these practices may not be sustainable.
When we consider investing in high dividend-paying companies, we may need to focus on share price stability and dividend sustainability. A prudent consideration is choosing companies with a relatively high dividend yield range, say, 2-5%. Also, it can be important to pay attention to dividend growth. For example, companies with a Compound Average Growth Rate（CAGR）of dividends no less than 5% and a history of at least ten years of increased payments might look attractive.
When evaluating company fundamentals, it's important to assess performance stability. Some of the criteria include a market capitalization of over $10 billion, continuous net profit growth for at least 5-10 years with an average rate of over 5%, and strong short-term solvency（ability to repay debt）with a current ratio higher than 1.
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bigblindjon : Good information to know, thanks!
D Blaine : Find the company’s “payout ratio” or “coverage.” For most stocks, ideally under .80. The lower the better as it reflects how secure future dividends will be.
73276169 : Thank you for the information it was worth reading
UniBoBinU : I was aware that high yield dividends were usually due to high-risk activity, but the other information that was provided is new to me. Thank you!
Moomoo LearnOP 73276169: Well done. Thanks for your likes. Hope you enjoy your learning journey here.
Moomoo LearnOP D Blaine: Appreciate your sharing. Mooers like you are what keeps us motivated.
Moomoo LearnOP UniBoBinU: Happy to hear that.
Moomoo LearnOP bigblindjon: Your support is our long-term motivation.