With regards to finding the optimum dividend stocks, you’ll probably desire to use an automatic stock dividend screener as a tool to locate good candidates to purchase. Screening is a method to scan the stock market for stocks that meet your particular criteria. Dividend investing can be quite profitable, and while there are lots of stock screening programs available (some you pay for, some have the freedom – I’ll list a few free ones at the conclusion want to know ,), it is important to view the characteristics of good dividend stocks, so that your screening tool can help you filter out unacceptable choices.
To have an easy dividend stock screener to find the best dividend stocks, I would suggest focusing on the following qualities to help find strong dividend stock candidates:
Dividend Yield – The dividend yield could be calculated primarily in a single of two ways – either using the trailing Twelve months dividends, or using the expected dividends for that upcoming 12 months, and then dividing that number by the current cost of the stock. Ideally you want to buy dividend stocks which have a yield that is higher than the entire market. Stock Market yields as well as individual stocks yields will fluctuate over time, as stock prices move up and down, and the amount companies pay out in dividends changes, so it’s good to check on these factors before you buy a regular, and not just rely on data you put together at some earlier time. At the moment, I recommend searching for stocks with dividend yields with a minimum of 4% to 5%.
Profit – Also known as earnings, profit drives company growth, and most importantly for us, profit is exactly what pays dividends in healthy stocks that pay dividends (some company’s purchase dividends by taking on more debt, and distributing that cash to talk about holders – see the next paragraph for additional on debt). While there are lots of ways to measure profitability, one widely used indicator that may be found on most stock screens is return on equity (ROE). For ROE, the higher the better. The minimum ROE we would like is incorporated in the 10% to 12% range. Another great indicator for profitability that’s available on many stock screeners is earnings per share (EPS) – again, the larger the better for this indicator too.
Debt – Many of the best dividend stocks come from companies which are large, mature, and also have accumulated long term debt during the process of growing to their current state. The problem with debt is that an excessive amount of it may represent a risk to future dividend payments when the company goes into a rough patch, and earnings drop to the point where they may need the money they normally shell out as dividends to service their debt payments. One particular way to measure debt would be to look at the debt to equity ratio. For our purposes, we would like to see the company financed with increased equity than debt, which means that our dividend stock screener will have to limit the debt to equity ratio to under.5, and ideally, you should look for stocks with a ratio even less than that.
Market Cap – Also known as the marketplace capitalization of a company, is a great way to filter the size of the organization you are searching for. Market cap is only the total number of shares outstanding, multiplied by the current cost of the stock. Most analysts make use of this since the measure of a company’s size. For our dividend investing purposes, we would like strong stable companies, and bigger companies are generally safer than smaller ones, so for market cap, select stocks that are at least $2 Billion.
Valuation – This is how much the market is paying for a company’s earnings stream. With this, we actually want a low valuation, because that always implies that a company’s stock price has been beaten down relative to it’s earnings. The cost to earnings ratio (P/E) is a widely available indicator that can help you assess importance of a free dividend stock screener.
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