When selecting dividend stocks, one should focus on:
- Dividend Yield: Ideally 4 to 5 percent. Anything less may make other investments like bonds more appealing.
- Consistency: Companies should have a consistent history of increasing dividends for the past five years.
- Net Income and Cash Flow: A consistent increase over the last five years indicates a growing business.
- Share Price Stability: A stable or upward-trending price over five to ten years is ideal.
- Defensive Companies: These are preferable as they can maintain dividends even during economic downturns.
- Debt Level: Low debt levels are more sustainable for long-term holdings.
- Dividend Payout Ratio: Between 20 to 100 percent is ideal. Anything more than 100 percent is a potential warning sign.
