There are many factors adding up to a good dividend stock. One factor is will the stock be able to continue to increase the dividend. A good way to determine if they will be able to continue to increase the dividend is if the stock has a payout ratio of 60% or less. If the company doesn’t have a lot of debt or more cash then debt and the payout ratio is under 60% then they can continue to increase the dividend most likely.
The second factor is does the stock have a dividend yield of over 3%. This can be ignored if the stock has close to a 3% yield and a very high 5 year compound annual growth rate. This is important because while you want the company increase the dividend you also want to be receiving some income short term.
The third factor is does the company have growing sells or declining sells. Now this might sound somewhat obvious but some investors see all these great dividend qualities and overlook the actual company. This is not good as at the end of the day you are investing in the company and not the dividend. If they have growing sells then this will allow them to continue to increase the dividend so this is very important.
The fourth factor is does the stock have a proven business model for example a cruise stock has a proven customer base. The stock you are looking at needs to have a proven market for the product or service, think about the great stocks like amazon it has a proven market that is stable and growing. If you are looking to buy a dividend stock these are some guidelines to follow.
