4 Tips for Finding the Best Dividend Stocks

Dividend stocks are something a lot of investors are putting money into today. Companies that pay dividends have an excessive amount of money at the end of the quarter or year, and they pay them to the shareholders on a per share basis. The amount they pay, and the length of time between dividend payments varies as well.

Some investors like this, and some do not. Obviously it is nice to get bonus money in addition to the stock value. However, some people would prefer the company invest that money into other business opportunities and increase the stock price.

After all, the money they are paying out is basically excess revenue they did not know what to do with. Therefore, dividends reduce the amount of money the company has to devote to other business endeavors. However, many times companies are so profitable that they are already investing into business expanding resources. Therefore, dividends are not necessarily a bad thing.

Of course, there are quite a few different dividend paying stocks there, so selecting the best ones is not easy. Here are 4 guidelines to follow when searching:

Find companies that have generated consistent profits

These are the best long term investments to go with, because the past performance is the best predictor of the future. Look at their 10 year history, and make sure the profits have either been holding steady or increasing. If so, this is a very good sign.

Check long term debt levels

These are a good indicator of the future performance of a company. The better firms will have low levels of long term debt.

Look at their future outlook

After you have made sure they have been profitable and the long term debt levels are low, you should check and make sure that their future outlook is good. You tell this by evaluating their competition.

For instance, one of their competitors could be coming up with some new technology that will make their product obsolete in the near future. If this is the case, it is not a good sign for their future. No matter how profitable they have been in the past, this cancels it out.

Look at the stock price

It should be undervalued when compared with the firm’s intrinsic value. Ideally, it should be 70% or less. The reason is that stock prices in the long run tend to reflect the company’s performance, but short term can be manipulated based on other market factors.


Finding the best dividend stocks is not easy. It will take some research and effort, but it can be done. If you use these 4 tips, you can find stocks that can potentially earn you a 20% ROI or higher every year.

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