The dividend yield is one of the important ratios to calculate for dividend stocks. It is calculated as the total annual dividends paid per share, divided by the current stock price. Movements in the stock price will change the dividend yield. When you’re looking for income-producing stocks, dividend yield is typically your most important consideration. The best companies to invest in for a high dividend yield have strong positions in healthy industries. They also incorporate strong management that makes the right moves to remain competitive in changing marketplaces.
Dividend yields are a sign of investment quality. Some good companies reinvest profit to spur growth instead of paying dividends. But fraudulent and failing companies are hardly ever dividend-paying stocks. So if you only buy stocks that pay dividends, you’ll automatically stay out of almost all the market’s worst stocks.
For a true measure of stability, focus on those companies that have maintained or raised their dividend yields during a recession or stock-market downturn. That’s because these firms leave themselves enough room to handle periods of earnings volatility. By continually rewarding investors, and retaining enough cash to finance their businesses, they also provide an attractive mix of safety, income and growth-and are a big part of a successful long term investment strategy
High dividend yields can be a warning sign, however
When looking for high dividend stocks, you should avoid the temptation of “reaching for yield.” That is, choosing investments purely because they offer a high current yield. That’s because a high yield may signal danger rather than a bargain, if it reflects widespread investor skepticism that a company can keep paying its current dividend. Dividend cuts always undermine investor confidence, and can quickly push down a company’s stock price.
While a high-and safe-yield dividend is generally favourable, be aware that it is only one of many indicators that we look for in a good stock. You need to look at the big picture, so you get a realistic view of a company’s long-term prospects. As well, at TSI Network, we recommend our three-part Successful Investor strategy:
Discover how to put an extra strength in your portfolio with our specific advice on how to identify high-quality dividend stocks. It’s all in our newly updated report. Dividend Paying Stocks: How High Dividend Stocks Can Supercharge Your Income Investing.
MANULIFE FINANCIAL CORP. $21.44 (Toronto symbol MFC; Shares o/s: 2.0 billion; Market cap: $42.9 billion; TSINetwork Rating: Above Average; Dividend yield: 4.7%; www.manulife.ca) is Canada’s largest life insurer.
Manulife has entered into agreements with three reinsurers on $13 billion of its riskiest annuity and universal life policies in… Read More
RIOCAN REAL ESTATE INVESTMENT TRUST $24.48 (Toronto symbol REI.UN; Units outstanding: 310.5 million; Market cap: $7.5 billion; TSINetwork Rating: Average; Dividend yield: 5.9%; www.riocan.com) owns all or part of 250 shopping centres and other properties across Canada. They include 17 projects now under development. In all, the… Read More
IBM $124.84 (New York symbol IBM; Shares outstanding: 912.8 million; Market cap: $111.9 billion; TSINetwork Rating: Above Average; Dividend yield: 5.1%; www.ibm.com) has now agreed to acquire Red Hat Inc. (New York symbol RHT) for $34 billion. This is the biggest acquisition in IBM’s history.
Red Hat is… Read More
CP reported record revenue in the latest quarter, with increases across all of its businesses. Despite rising fuel prices, profits also hit a new high, with overall costs dropping to record lows. That performance bodes well for the company as demand for rail shipments moves… Read More
LISTEN:
3M COMPANY $185 (New York symbol MMM; Income Growth Dividend Payer Portfolio, Manufacturing & Industry sector; Shares outstanding: 582.3 million; Market cap: $107.7 billion; Dividend yield: 2.9%; Dividend Sustainability Rating: Above… Read More
LISTEN:
BANK OF NOVA SCOTIA $69 (Toronto symbol BNS; Income-Growth Portfolio, Finance sector; Shares outstanding: 1.2 billion; Market cap: $82.8 billion; Dividend yield: 4.9%; Dividend Sustainability Rating: Above Average; www.scotiabank.com) is the third-largest… Read More
AT&T INC. $30 (New York symbol T; Income-Growth Dividend Portfolio, Utilities sector; Shares outstanding: 7.3 billion; Market cap: $219.0 billion; Dividend yield: 6.7%; Dividend Sustainability Rating: Highest; www.att.com) is the largest wireless carrier in the U.S. It also offers traditional phone and satellite TV services.
The company last raised… Read More
3M COMPANY $185 (New York symbol MMM; Income Growth Dividend Payer Portfolio, Manufacturing & Industry sector; Shares outstanding: 582.3 million; Market cap: $107.7 billion; Dividend yield: 2.9%; Dividend Sustainability Rating: Above Average; www.3m.com) started up in 1902 as the Minnesota Mining & Manufacturing Company.
While it started off making… Read More
POWER CORP. $27 (Toronto symbol POW; Conservative-Growth Dividend Payer Portfolio, Finance sector; Shares outstanding: 417.0 million; Market cap: $11.3 billion; Dividend yield: 5.7%; Dividend Sustainability Rating: Above Average; www.powercorporation.com) is a holding company with a diversified list of businesses. Those include 65.6%-owned Power Financial, which in turn holds… Read More
ARCHER DANIELS MIDLAND CO. $48 (New York symbol ADM; High-Growth Payer Portfolio, Manufacturing & Industry sector; Shares outstanding: 559.7 million; Market cap: $26.9 billion; Dividend yield: 2.8%; Dividend Sustainability Rating: Above Average; www.adm.com) processes corn, wheat, soybeans, canola, and other crops to make a variety of food ingredients… Read More
Learn everything you need to know in 'The Canadian Guide on How to Invest in Stocks Successfully' FREE Special Report from The Successful Investor.
How to Invest In Stocks Guide: Find 10 factors that make your investments safer and stronger.
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