How to buy stocks for dividends

July 27, 2010

Investing in stocks that pay dividends is one of the best financial decisions an investor can make. These investments not only provide an opportunity to increase net worth from rising share prices, they also can help supplement an investors income for many years. As long as an investor is diligent about selecting these investment choices, there is little associated risk over the long term. Stock Dividents can be attractive as a source of steady income, while you still get to retain the stock shares for further returns. There is also a perception that companies which can afford to pay dividends are generally more stable.

Finding the best stocks that pay dividends requires research and patience. Anyone can simply invest in the highest yielding securities blindly based only on the current payout. That investment strategy, however, will eventually cost the investor a lot of lost earnings and time. Searching for the best quality companies is a safer and more stable option for the long term investor. So how can an investor find the best dividend paying stocks?3 Ways to Find Stocks that Pay Dividends


Here are 3 popular strategies for identifying quality stocks that pay dividends.

List of Dividend Paying Stocks -
There are many organizations that publish lists of dividend paying stocks that offer some good investment ideas. For example, the S&P 500 Dividend Aristocrat list is published once per year which contains stocks with a strong history of dividend increases. A company must have raised their annual dividend distribution consistently for at least 25 years.

Stock Screen -
The best dividend stocks can be filtered out by identifying a set of criteria to look for. Most online discount brokers and financial websites offer stock screen tools that can be used to narrow down the search for stocks that pay dividends. Income investors typically set their criteria using data like dividend yield, dividend payout ratio, P/E ratio, etc.

Financial Websites and Blogs -
There are plenty of places to look for dividend paying stocks on the internet. The blogging community offers several different options and analysis which can help investors identify potential opportunities. Just remember that most of these sites offer biased opinions on investments, so due diligence is required.

Final Thoughts
There are many investment choices when it comes to stocks that pay dividends. Some of these stock choices make for very poor investments. On the other hand, there are plenty of blue chip dividend stocks that are safe and secure and can be wonderful investments. Filtering out the poorly run companies from the best dividend paying stocks can be difficult, but is necessary for long term success.

Get free updates in your mailbox.