Do you know how to choose stocks to buy? More goes into it than looking at share price and the current dividend yield. It’s important to get a broad picture of the stock in question and examine the company’s history of paying a dividend as well as its assets and its current market position

If you’re looking for stocks to buy, you will want to consider stocks paying a dividend. For a true measure of stability, focus on stocks that offer dividends and have maintained or raised them during economic or stock-market downturns.

However, guidelines on how to choose stocks to buy involve other characteristics beyond dividend yield.

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How to choose stocks to buy: A history of paying dividends

Apart from a steady or rising dividend, you should look for stocks that have a long history of paying (and raising) their dividends. Investing in dividend stocks is one of the best investment decisions you can make. The best blue chip stocks, for instance, are almost always dividend paying stocks.

Dividend history is very important to dividend growth stocks. Ideally, you should look for dividend growth stocks that have been paying dividends for 5 or more years. While companies can fake earnings, dividends are cash outlays. If you only buy dividend-paying value stock picks, you’ll avoid most frauds.

What is the dividend stock’s debt load? Would it have a hard time recovering from an economic downturn? The more manageable the debt, the better. When bad times hit, debt-heavy companies often go broke first. Especially ones that also keep trying to allocate part of their cash flow to paying dividends.

How to choose stocks to buy: Look for vital blue-chip companies

When assessing blue-chip companies, you need to ask: What are they doing to remain vital? These companies hold strong positions in healthy industries. They also have strong management that will make the right moves to remain competitive in a changing marketplace.

Stocks like these give investors an additional measure of safety in today’s volatile markets. And the best ones offer an attractive combination of low p/e’s (the ratio of a stock’s price to its per- share earnings), steady or rising dividend yields (annual dividend divided by the share price) and promising growth prospects.

The best blue chip companies offer stability, freedom to serve all shareholders, have low debt, and have industry prominence, if not dominance.

How to choose stocks to buy: Hidden assets

If you buy a stock for its hidden assets, yet those assets remain hidden or ignored by investors—or turn out to be less valuable than you thought—it can’t hurt you much. By definition, a stock’s hidden assets have not had much impact on its price. If you paid little if anything for the assets, you have little to lose. But the best hidden assets will eventually expand a company’s profit, grab investor attention, and push up its stock price.

The best time to find hidden assets is when they’re still hidden, long before the company begins taking steps to profit from them. Understanding and seeking out hidden assets while you’re evaluating a stock can add enormously to your profits in the course of an investing career. But you need patience to profit from them, because they can stay hidden for a long time after you buy.

Hidden assets can also cut your risk. Stocks with hidden assets are likely to hold up better than those whose assets are easier to spot, since those are the last stocks that experienced, successful investors sell. When times are good, stocks with hidden assets tend to do better than average. Good times give them opportunities to put their hidden assets to work.

Stocks with hidden assets are not rare, but they’re hard to find. But when you know what to look for, you can discover them.

Bonus: Don’t indulge in frequent trading

Frequently trading online can be profitable for short periods. But you can’t reliably profit from it over the long term. In fact, most short-term traders wind up losing money. By the time their beginner’s luck fades, many are trading in dangerously large quantities.

Frequent trading can also lead you to buy stocks online that are of lower quality or are thinly traded. The danger arises from the fact that the bid and ask spreads of many of these investments can be so wide that the share price will have to go up significantly before you’ll even begin to make money on a sale.

You can make trades quickly and easily with online trading, and that cuts your commission costs. However, for successful investors cost savings are a bonus, not the objective, when you buy stocks online.

It is far more important to focus on high-quality, well-established companies and how they fit in a well-balanced portfolio. The longer you hold these stocks, the greater the chance that your profits will improve.

When have you chosen short-term investing strategies over a long-term investment strategy?

What factors do you consider when thinking about what stocks you want to buy?