dividend stocks

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Wondering if you can shed some light on what makes a dividend stock a good one. I look at the yield, and if it’s high it’s good. Clearly this is insufficient and in fact in some cases probably wrong. In particular, I notice your top dividend stocks for this week have mostly yield between 1-3% which is much lower than several others not on your list that are between 6-8%. My understanding is that dividend stocks are a bit like a higher-risk savings account: the price may not move much (although few were spared by covid but normally), but you get interest on your “loan” to the business, and the interest is that yield. What am I missing.

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Asked on January 28, 2021 4:12 pm
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Hi there,

IMportant to note about our dividend screener is that it is based on a financial algorithm, so it doesn't take into account market sentiment or other. When ranking the divdiend stocks we usually have three categories:

Dividend Safety: Is the dividend well covered by cash flows and earnings. Are earnings growing/declining, etc.
Dividend Growth: Is the dividend growing? Is it growing at a faster/slower pace?
Dividend Yield: Does it provide a high or low yield, is the yield sustainable or inline with historical averages.

Many factors we take into account. A high yield is not always a good thing - especially if it is above historical averages. It may be a sign that the company's share price is in a downtrend which could mean bigger issues. It can be a warning sign that the are some fundamental issues and that a dividend cut is on the way.

A common misconception with dividend stocks is as you pointed out - the price may not move much. That is a false assumption. Although many high growth stocks don't pay a dividend as they are reinvesting back in the business, many still do balance growth and the dividend.

Mat

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Posted by Mathieu Litalien
Answered on January 29, 2021 4:54 am
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0
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✔
Private answer

Hi there,

IMportant to note about our dividend screener is that it is based on a financial algorithm, so it doesn't take into account market sentiment or other. When ranking the divdiend stocks we usually have three categories:

Dividend Safety: Is the dividend well covered by cash flows and earnings. Are earnings growing/declining, etc.
Dividend Growth: Is the dividend growing? Is it growing at a faster/slower pace?
Dividend Yield: Does it provide a high or low yield, is the yield sustainable or inline with historical averages.

Many factors we take into account. A high yield is not always a good thing - especially if it is above historical averages. It may be a sign that the company's share price is in a downtrend which could mean bigger issues. It can be a warning sign that the are some fundamental issues and that a dividend cut is on the way.

A common misconception with dividend stocks is as you pointed out - the price may not move much. That is a false assumption. Although many high growth stocks don't pay a dividend as they are reinvesting back in the business, many still do balance growth and the dividend.

Mat

Marked as spam
Posted by Mathieu Litalien
Answered on January 29, 2021 4:54 am
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