Learn how to find stocks that pay dividends for a more stable and successful portfolio

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Wondering how to find stocks that pay dividends? Here are some essential tips that help you generate more income, but also capital gains

Learning how to find stocks that pay dividends can pay off. If you’re new to investing, one tip we share often is to invest mostly in companies that have been paying a dividend for five or more years. Dividends are typically cash payouts that serve as a way for companies to share the wealth they’ve accumulated. These payouts are drawn from earnings and cash flow and paid to the shareholders of the company. Typically these dividends are paid quarterly, although they may be paid annually or even monthly.

Meanwhile, Canadians who own shares in Canadian stocks that pay dividends will also benefit from the dividend tax credit. 

Understand these characteristics so you can learn how to find stocks that pay dividends

The Growing Power of Dividends

Learn everything you need to know in '7 Winning Strategies for Dividend Investors' for FREE from The Successful Investor.

The Best Canadian Dividend Stocks to Buy: REITS Canada and other Top Canadian Dividend Stocks.

The top dividend-paying stocks have the following characteristics:

 They provide regular income

  • They are one of the dominant firms in an industry
  • They feature hidden assets
  • They are on high-quality, proven companies
  • They operate a well-established business
  • They have strong management
  • They have manageable debt

Above all, for a true measure of stability, focus on stocks that pay a dividend they’ve maintained or raised during economic or stock-market downturns. 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.

A track record of dividend payments is a strong sign of reliability and a sound indication that investing in the stock will be profitable for you in the future.

Look into these sectors while learning how to find stocks that pay dividends

Utilities and Canadian banks generally pay high, secure dividends, and have long histories of raising their payments, even during downturns. However, you’ll still want to make sure your portfolio is well-diversified across most if not all of the five sectors.

While we continue to recommend that you spread your investments out across most if not all of the five main economic sectors (Manufacturing & Industry; Resources; Consumer; Finance; and Utilities), the proportion of holdings you devote to each sector depends on your temperament and financial goals.

For example, if you’re an income investor, you may wish to place more emphasis on the Utilities and Canadian banks. That’s because these firms generally pay high, secure dividends, and have long histories of raising their payments, even during downturns.

By diversifying across most if not all of the five sectors, you avoid overloading yourself with stocks that are about to slump simply because of industry conditions or investor fashion.

You also increase your chances of stumbling upon a market superstar—a stock that does two to three or more times better than the market average.

Find out if a stock will keep paying its dividend by looking for these characteristics

  • Look for companies with long-term success. These companies are the most likely to keep paying and increasing their dividends.
  • The current financial health of a company. If a company is doing well, has done so consistently, and shows signs of growth, these factors are indicative of stocks that will keep paying a dividend.
  • A company’s current dividend. If a company currently offers a healthy dividend, this is a good sign of its potential to continue offering a steady dividend.
  • How does the company manage its relationships with investors? If there is a favourable relationship, and the company fits the other qualifications listed above, it may be a good dividend-paying stock to invest in.
  • Note the competition. Look for companies with a strong hold on a growing market and a unique product or service that cuts its competition.

Taking a close look at dividend-paying growth shares as part of the process of learning how to find stocks that pay dividends

Growth dividend stocks are a unique type of investment that can deliver strong earnings quarter after quarter—and yet at the same time pay dividends.

We feel that growth dividend stocks that pay dividends can be an important part of your portfolio if they have strong business models and sound balance sheets.

Use our three-part Successful Investor approach to dictate how to find stocks that pay dividends

  1. Hold mostly high-quality, dividend-paying stocks.
  2. Spread your money out across most if not all of the five main economic sectors: Manufacturing & Industry, Resources & Commodities, Consumer, Finance and Utilities.
  3. Downplay or stay out of stocks in the broker/media limelight.

Some investors believe dividend stocks are overrated and that the dividend payments should be reinvested back into the company instead. How do you feel?


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