What are high dividend yielding stocks

What are high dividend yielding stocks, and why do some investors prefer these choices? These are stocks which pay dividends that are higher than average, and many of them are excellent investment choices but others may be the wrong option for your goals and acceptable risk levels. Just because this type of investment offers a terrific return does not mean that you should ignore the risks involved or fail to do the proper research and evaluation necessary. To do this research you will need to understand what they are, how they work, and what to watch out for with high dividend yielding stocks. You will want to look for choices that yield more than two percent, and preferably between six and ten percent. If a stock has a dividend yield that is too high, or regularly stays above ten percent, then you may want to consider another investment choice instead. This can be a sign that there is a problem somewhere, and you could be facing larger than usual risks as well.

High dividend yielding stocks need to be researched carefully, because they can include varying risk levels. There are some tips that can help you evaluate each of these investment choices, so that you stay within your acceptable risk levels while maximizing the dividend and profits you see from your investments. One downfall of high dividend yielding stocks is that the chance of the dividend being lowered or eliminated is always a possibility and is a higher risk with stocks that have higher yields. One tip is to invest only in the stock of a company that you understand. Look at simple companies that you either understand already or are willing to research. Large corporations may make great investments, but are often so complex even brokers and traders do not completely understand everything the company does. The more complex a business is the higher the risks are that something may happen to lower or cut out the dividends. You also need to look at the demand for the product or service the company provides. If it is in high demand then this helps lower the risks some, but there is always a chance that demand will drop, and this may affect your investment.

Another factor to look at with high dividend yielding stocks is the cash flow. Does the company have a positive cash flow? If not then the business may need to borrow or use cash reserves for the dividend payment, and these are not ideal situations for investors. One consideration that you may not think about is the need for credit that the company has. With the economic downturn credit has tightened up substantially. This will affect the bottom line of your investments, so look for high dividend yielding stocks which have a small need for credit, if any at all. Look for a positive cash flow and a high cash balance as well, because both of these factors will help lower the risk that you will lose any of your investment capital, and that the higher dividends are legitimate and should usually continue.

The information supplied in this article is not to be considered as medical advice and is for educational purposes only.