Buying good dividend stocks is essential to building a great dividend stocks portfolio, which helps build passive income for the long term. It is important that these companies are stable and will continue to pay you dividends eternally or until you sell them. Below are some guidelines that will help you look for some strong dividend payers.
Good Dividend Stock Guidelines:
– Healthy Balance Sheet
– Positive Cashflow
– Large Company
– Low Payout Ratio
– Good Dividend Yield
– History of Paying Dividends
Healthy balance sheet
A healthy balance sheet indicates that the company is doing well and is not at risk of default or bankrupt, which will not only remove the dividends but will also result in the loss of your entire investment.
A positive cashflow indicates that the company has the money to pay the dividends during every payout.
A large company that generates a lot of revenues usually will be able to pay out dividends for the long term.
Low Payout Ratio
A low payout ratio indicates that the company is not exhausting its revenue to pay out the dividends.
Good Dividend Yield
A good dividend yield allows a good income stream while holding the company stock.
History of Paying Dividends
A long history of paying dividends indicates the company wants to do this for the long term and shows confidence that it wants to continue this precedence.