Get Free Value Line Reports for High Dividend Stocks

One source of good high dividend stocks can be found simply by looking at the Dow Jones Industrial Average. Simply sort the list by yield and go down the list and analyze each of say, the top 5 until you find one with all the right fundamentals that you are comfortable buying. A good source for your research is the Value Line Investment Survey.

Value Line is a stock research company that puts together a very comprehensive analysis of stocks and covers things such as timeliness, safety, and technical aspects of the stock and the company. They make available to everyone a free copy of the report for each of the 30 companies that make up the Dow Jone Index. You can get the copies here.

High dividend stocks still take some detailed analysis before a purchase should ever be made. However, the high dividends can give you some cushion if you buy at the wrong time - you will receive some income from the stock to help offset any short term loses you might suffer. Good analysis is very important to help limit bad decisions.

5 Crucial Metrics to Use When Evaluating High Dividend Stocks

Investing in high dividend stocks is not rocket science. There are certain key items to a companies performance that an investor should use to evaluate if a certain company should be added to a portfolio or not. Although this is not meant to be a full guide to stock evaluation, it is a list of the most important factors that an
investor needs to be aware of.

1. Dividend growth - all investment quality high dividend stocks should show a consistently high dividend growth rate.
2. Earnings per share growth - earnings are what keeps a company in business and paying dividends. Look for companies whose earnings are trending up smoothly instead of choppy.
3. Revenue growth - sales are what bring in the money for a company. They also are an indication of how the products or services of the company are performing in the marketplace. Again, look for revenue that goes up year after year.
4. Cash flow - a company cannot operate without cash. As a high dividend stocks investor you need cash flow to support those dividend payments. Look for positive cash flow year after year.
5. Return on equity - this is how well management of a company does in growing that company into something bigger and more profitable.

There are of course are many other factors that must be considered before buying a share in a high dividend stocks company. However, using the above 5 will provide you with a good basis to move on to further analysis.

Note: Be sure to check out The Dividend Guy Blog.

Watchout for Dividends at Risk on High Dividend Stocks

There is one particular risk that comes into play when investing in high dividend stocks. It is in no way a reason not to invest in them, but is something that an investor must be aware of to be a successful investor. It is called the dividend payout ratio.

To assess if a company's dividend is at risk, you need to look at the dividend payout ratio. The dividend payout ratio is defined by Investopedia as:

The percentage of earnings paid to shareholders in dividends

What I look for is a trend over time of the payout ratio. If a payout ratio is consistently high at 60%, then I do not believe an investor needs to worry about it. But if it has been consistent at 60%, and then jumps to 90% then more research is definitely needed and that companies dividend may be at risk.

This is especially important when you are looking at high dividend stocks. These companies have higher than average dividends and an extra bit of caution needs to be taken to ensure success.

High Dividend Stocks: Dividend Aristocrats

One of the top sources of high dividend stocks ideas for investors is the S&P 500's Dividend Aristocrats' List. Thee S&P High Yield Dividend Aristocrats is designed to measure the performance of the 50 highest dividend yielding constituents that have followed a policy of consistently increasing dividends every year for at least 25 consecutive years. Here is the stocks that are currently on the list:

Ticker Company
ABM ABM Industries
ABT Abbott Labs
ASBC Associated Banc-Corp.
AVY Avery Dennison Corp.
AWR American States Water Co.
BAC Bank of America Corp.
BBT BB&T Corporation
BKH Black Hills
BUD Anheuser-Busch
CBSS Compass Bancshares
CINF Cincinnati Financial
CMA Comerica Inc.
ED Consolidated Edison
EMR Emerson Electric
FHN First Horizon National
FITB Fifth Third Bancorp
GCI Gannett Co.
GE General Electric
HB Hillenbrand Industries
JNJ Johnson & Johnson
KEY KeyCorp
KMB Kimberly-Clark
KO Coca Cola Co.
LEG Leggett & Platt
LLY Lilly (Eli) & Co.
LZB LA-Z Boy Chair
MCD McDonald's Corp.
MMM 3M Company
MO Altria Group, Inc.
MRBK Mercantile Bankshares
MTB M&T Bank Corp.
NFG National Fuel Gas
NWN Northwest Natural Gas
PFE Pfizer, Inc.
PG Procter & Gamble
PNY Piedmont Nat'l Gas
PPG PPG Industries
RF Regions Financial Corp.
ROH Rohm & Haas
RPM RPM International Inc.
SLM SLM Corporation
SNV Synovus Financial
SWK Stanley Works
USB U.S. Bancorp
VFC V.F. Corp.
VVC Vectren Corporation
WGL WGL Holdings, Inc.
WL Wilmington Trust Corp.
WPS WPS Resources
WWY Wrigley (Wm) Jr.

These are all good starting points for further investigation. If high dividend stocks are of interest to you, then do not miss this list.

Good Brokers for Investors of High Dividend Stocks

The key thing in terms of a brokerage account for a high dividend stocks investor is to find one that will reinvest dividends into fractional shares. I have searched high and low, but there are only two that I am aware of. One is in the U.S. and one is in Canada

Canada: The Canadian Shareowner's Association (CSA)

U.S.: Sharebuilder

I personally use the CSA and have been quite happy with them. Again, the real power of dividends comes from the compound growth provided by reinvesting dividends. If you are an investor in high dividend stocks, or are looking to become one, either of these brokers will help you in achieving your goals.

4 Ways to Control Investment Costs in Your High Dividend Stocks Portfolio

Costs are a crucial item to manage in any portfolio, especially in a high dividend stocks portfolio. The impact that trading costs have is huge. Here are 4 ways an investor can control costs in their portfolio:

1. Buy low cost index funds or ETFs that emphasise high dividend stocks. Examples can come from Vanguard or iShares.
2. Select a broker with low trading commissions. There is no need anymore to pay high trading commissions for the promise of higher service as there is lots of low fee brokers who will provide a high level of service.
3. Do not trade excessively in your account. Excessive trading only generates higher fees - if you are a high dividend stocks investor then trading is not the way you want to run your account anyway.
4. If you are going to buy mutual funds (see this article if you are), then only buy no load funds. There are many high quality funds that do not have a front or back end load. You get no added value from these commission based funds that can't get from a no load fund.

I am sure there are other ways to save money in your high dividend stocks account. However, these 4 ways will ensure you don't get hosed on fees by your broker or your account.

Investing in People's Vices Through High Dividend Stocks

There are a lot of high dividend stocks that an investor can invest in. However, some of the highest dividends can be found by investing in companies that cater to people's vices. Here is a list of some "sinful" industries from Investopedia where you will find some high dividend stocks:

* Gambling - Just one trip to Las Vegas or Atlantic City and the extent of just how big a business gambling is bowls you over. In Vegas alone there are numerous casino operators with market capitalizations in the multibillion-dollar range. In addition to the casino and hotel operators, is the less sexy end of the business - maintaining the hardware to keep the casinos full. The industry also encompasses racetrack operators as well as sports betting companies. One thing is clear, gambling is not about to go away anytime soon. If anything, gambling's popularity has soared in recent years with more and more ways to place a bet online.

* Alcohol - The profitability of beer, wine and spirits has been something that companies have been capitalizing on for hundreds of years. While the majority of vineyards are private, there are plenty of brewers and distillers that are publicly traded. In fact, there are now hardly any cities which do not sell brands such as Budweiser and Heineken.

* Tobacco - Despite a firestorm of class-action lawsuits at the end of the millennium and the billions of dollars spent in settlement payouts, tobacco and cigarette companies remain profitable. Even if smoking has become less vogue in North America, the rest of the world continues to puff away. Huge markets remain for tobacco products for the foreseeable future.

* Sex - The sex industry is so enormous and much of it underground, that it is hard to find precise industry figures. But in recent years a number of companies in the pornography industry, condom manufacturing and even makers of drugs designed to enhance a sexual experience have gone public. Just like gambling, the internet brings a whole new dimension to this business. It may be a taboo subject, but there are companies doing very well selling pornography on the internet (though most of these firms are not publicly traded). Even if you ignore the more brazen products like Playboy and Hustler, there are a great many more innocuous industries that benefit from the sale of sex such as hotel and cable operators that make handsome sums from their pay-per-view movies.

* Defense - Although the defense industry represents one of those gray areas that we alluded to earlier, in most circles these stocks are considered sinful. The production of missiles, guns, tanks and fighter jets can be interpreted in different ways - either you view it as destructive and harmful to the entire human race or just to those in the country where the arms are destined, or you may feel that it is simply a proactive measure for protecting one's nation. Regardless of your ethical or moral stance on the issue, there is no debate on the profitability of the manufacture, sale and distribution of military equipment.

The important thing that an investor must be comfortable owning the stock, even if it has a phenomenal dividend track record. If you do not morally agree with gambling or smoking then these stock should not be in your portfolio, no matter if they are high dividend stocks or not.

Reminder: If you are interested in investing in high dividend stocks, then the one book that is a must read is The Single Best Investment: Creating Wealth with Dividend Growth. It will provide you with the background on why this style of investing works and how you can use it in your own portfolio.

High Dividend Stocks and Dividend Reinvestment Plans

There is a way to purchase high dividend stocks without having to open up a brokerage account or paying high commissions on those purchases - dividend reinvestment plans.

Dividend reinvestment plans, or DRIPs as they are often called, are ways and investor can reinvest their cash dividends by purchasing additional shares or fractional shares on the dividend payment date. Most brokerage accounts do not allow you to do this. The power of compounding your dividends year after year can be staggering. Consider this:



The chart paints a pretty amazing picture - reinvesting dividends provides investors with a much high return on their high dividend stocks than not reinvesting them. That is why I choose to invest in stocks that pay dividends.