If you want to find the best stocks for dividends to fit into a high-quality stock portfolio, consider their past history of dividend payments, the amount of risk you’re willing to take, and the geographical diversity of your holdings, among other important stock characteristics.

A key part of our Successful Investor advice is that we recommend investors look for dividend-paying stocks that are likely to pay off if business and the stock market are good, but that won’t hurt them too much during those inevitable periods when business or the markets are bad.

The best stocks for dividends like these are typically blue chip companies that have a history of providing dividends to investors. When researching these stocks, it’s important that you use the following assessments and judgments to help identify the best choices for your portfolio.

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2 key successful tips to help choose the best stocks for dividends

• Take care to diversify your dividend-paying stocks geographically. One of the worst things you can do is invest so that your portfolio would suffer a great deal due to a localized downturn in any one city, state or province. Ideally, your portfolio should give you exposure to much of the North American economy, plus some calculated international exposure, if only through North American multinationals.
• Develop a clear idea of how much risk you are willing to accept, through good times and bad. For example, some investors become more aggressive as the market rises, and more conservative as the market falls. The problem here is that all market trends, up or down, eventually reach a turning point. If you take on more risk as the market rises, you’ll wind up owning your riskiest portfolio just when the market is near a peak. That’s when risky stocks can do their greatest harm to your net worth.

The best stocks for dividends: Canadian dividend stocks are a strong investment in any market

A company with a long-term record of paying dividends is generally one that is most deserving of the “blue chip” label in its traditional sense. Dividends, after all, are much more stable than earnings projections. More important, dividends are impossible to fake—either the company has the cash to pay them or it doesn’t.

Canadian dividend stocks offer both capital-gains growth potential and regular income. In fact, dividends are likely to still be paid even if the price of the underlying stock dips.

Dividends from most Canadian companies come with the dividend tax credit. This cuts your tax rate.

The best stocks for dividends also reflect our Successful Investor philosophy

If you hold on to your more conservative stocks as the market falls, and sell your lower-quality stocks, you’ll wind up owning your safest portfolio just when the market is ready to rise. In fact, some investors have a tendency to sell portions of all of their stocks as the market falls. Taken to extremes, this may lead you to sell all your stocks on the day the market hits bottom.

As mentioned above, we believe investors will profit most, and do so with the least risk, by buying shares of well-established, dividend-paying stocks with strong business prospects.

The best companies to invest in for dividends have strong positions in healthy industries. They also incorporate strong management that makes the right moves to remain competitive in changing marketplaces.

These types of stocks give investors an additional measure of safety in today’s volatile markets. And the best ones offer an attractive combination of moderate 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.

Bonus Tip: What dividend investors need to know about these calendar dates

The declaration date: Several weeks in advance of a dividend payment, a company’s board of directors sets the amount and timing of the proposed payment. The date of that announcement is known as the declaration date.

The payable date: The payable date is the date set by the board on which the dividend will actually be paid out to shareholders.

The record date: Only shareholders who hold the shares before the payable date will receive the dividend payment. That date is known as the record date, and is set any number of weeks before the payable date.

Excessively high dividend yields and p/e’s can cause problems in your investing decisions. What other stock characteristics do you consider when you make investments?

What mistakes with dividend stock have you made that you can share with young investors just starting out?