When it comes to investing your heard-earned money somewhere for additional income, you should not make an emotional decision. A decision based on emotion can lead you to questionable and unsafe stocks.
If you want a safe investment, we advise you to consider high yield dividend stocks. High yield divided stocks are a reliable source of income for long-term returns. Generally, the companies that pay dividends are larger and well-established companies.
Here are some points that you must keep in mind when investing in the high yield dividend stocks.
By the time a firm becomes popularly known as a good investment, it is usually too late for it to still be considered a good investment. If you want to capture the lion’s share of a firm’s outperformance, you must be willing to do some primary research. You must study financial reports directly or obtain primary research from sources who do study financial reports.
And the first place to start is the earnings reports. Ultimately, it is the dividends that really matter. But dividends do not arise from nothing. Try to determine each firm’s true (what we call core) earnings and you will have a powerful tool in determining a firm’s ability to pay and grow its dividend in the future.
Another important feature to keep in mind is the dividend payout ratio. The dividend paid by the company must not be above 100% of the earnings the firm earns. Moreover, if you notice a big change in the ratio, this may be a red flag to at least dig a little deeper.
Poorly run companies can sometimes be pulled up only because the industry they are in is doing well. You should consider the context in which a company is conducting business. If the industry is growing and the company in which you are planning to invest does not seem to be getting the benefit of the growth in the industry, this is something to look into. If a firm cannot do that well when the wind is at its back, what will happen when the wind is at its front?