Many income-focused investors dwell on dividend yield and buy largely on that basis. More income is better, right?
Their system starts by identifying companies with the characteristics that exemplify long-term outperformance. Then they fish in this pond, since these businesses are likely to continue doing well. “It stacks the odds in our favor,” says Page. Here are the qualities they favor, and other tips on how to succeed in dividend investing:
There are many ways to measure corporate investment prowess, but Page and Mortimer use a gauge called cash-flow return on investment . They favor companies with a cash-flow return on investment greater than 10% for 10 consecutive years. 4. Look for strong balance sheets: When a company is stretched, it is more likely to be forced by the market to cut its dividend to pay its debt, Mortimer says. This can hurt a stock. A strong balance sheet means a company is less likely to cut its dividend.
6. Make concentrated bets: This is a tactic that many outperforming managers use successfully. It’s better to know a short list of names and invest only in them. These two managers like a portfolio of 35 stocks, with each representing about 3% of the portfolio. In contrast, many actively managed funds stick to 1% positions to get the “benefits” of wide diversification, which can actually hurt performance.
Foreign dividend stocks are a smart bet. Can get some crazy yields, especially thanks to this Coronovirus concern.