It’s surprising how often people overlooked secure and consistent earnings. Only profitable companies are considered as good companies even if they are not dividend paying stock companies. Always remember that the successful income investor’s portfolio is totally dependent on the company’s earnings. If the dividend payout of a company’ is strong then its earnings must be solid and consistent. Be sure to review company’s earnings over the previous five to ten years to see how well they held up under a variety of economic conditions. Earnings can be manipulated, of course, so it’s also a good idea to review related metrics such as cash flow and revenue figures over the same time period.

Strong Balance Sheets

Good businesses maintain strong balance sheets & generally a company with excessive debt raises two red flags in the mind of the potential investor:

•    How did the company accumulate the excessive debt in the first place? A successful operation produces lots of cash, not lots of debt.

•    A company already saddled with debt faces extra headwinds. Heavy debt puts pressure on profits, free cash flow, and the ability to invest in additional growth opportunities.
There are, of course, certain industries that require a capital intensive structure but then the question becomes of free cash flow and how easily a dividend paying company can service its debt load.

Sustainable Dividend Payout Ratio

The dividend payout ratio is simply the percentage of the total earnings that the dividend payout represents. A company’s dividend payout ratio is another important metric to consider before investing in stocks with dividends & the best use of this metric is to compare it to other dividend paying stocks in the same industry.

A high dividend growth rate is unsustainable if the dividend payout ratio is rising just as fast. Ideally, the payout ratio would remain relatively steady within a certain historical range for that particular stock. Certain industries have higher (or lower) dividend payout ratios than other industries. And, in the short term, the payout ratio will fluctuate wildly if there is a big change to earnings.

Long Term Competitive Advantages

Capitalism is totally based on competition including number of items: a significantly high barrier to entry by potential competitors, a vastly superior distribution system, or a particularly strong brand.

Healthy Dividend Growth Rate

Dividend growth rate only tells you how much the dividend has grown in the past which has become one of the biggest disadvantages of tracking a dividend paying stock. If the stock has seen recent rapid growth rates then there are no guarantees that the future dividend growth rate will mirror the past growth rate.
You can get a general idea of how successfully the company has been growing by tracking dividend growth rate of at least five year period.It will also give you a good sense of management’s attitude toward, and commitment to, the dividend. Is the dividend growing? Is the dividend growth rate consistent or does it fluctuates with no real pattern?

Preferred Stock | Best Dividend Paying Stocks

The post Powerful Keys for Finding the Best Dividend Paying Stocks appeared first on General Article Directory.

So, here are some of the important points which will help you to determine if the stock dividend is sustainable & will grow over time:

1.    Dividend Yield
Investors can actually do better by investing in above-average dividend yield stocks with the potential for significant dividend growth over time or stocks that have a long history of boosting dividends each year. Although such companies don’t declare large increases, when dividend payments are hiked regularly the yield on your original investment or cost (YOC) can climb dramatically over time. Generally it is advisable that one should look for stocks that have at minimum of 2% dividend yield.

2.    Dividend Payout Ratio
Dividend Payout provides us the percentage of earnings that is paid out to shareholders as dividends. The payout ratio is also a good indicator for growth stocks. A higher payout ratio indicates an implicit admission by management that future growth prospects are limited& if it shows quick growth, it means that company has plowed back its earnings. Sometimes the management has to cut the dividends or raise debt to pay the dividends, both of which are bad for future earnings and dividend growth.It is generally suggested to look for companies whose payout ratio is between 20% – 50% as it allows the company to retain the rest of the earnings for further re use – in acquisitions, capital investments or to retire debt as well as have sufficient rooms for further dividend increases.

3.    Dividend Coverage Ratio
This important ratio tells us how safe the dividend is based on the free cash flow generated by the company. Free Cash Flow (FCF) is the cash that is left over after the company has made the necessary investments back into the business or is the amount of cash that can be taken out of the business without impairing future results.Dividend Coverage Ratio is calculated by dividing the Free Cash Flow per share by dividend per share. A ratio less than 1 suggests that dividend cut is likely to happen as the company is burning cash rather than it is bringing in. A ratio of 2 or higher indicated that the company is in a better position to pay the dividends.

4.    Quick Ratio
The Quick Ratio indicates whether the company has enough liquidity to pay for its dividends at the current level. It is calculated by amount of liquid current assets by current liabilities. Liquid assets are those assets that can be converted into cash quickly & it excludes inventory and other current assets that are not liquid.
Therefore, a higher ratio indicates a more liquid current position.

5.    Short Term Debt Coverage Ratio
Short term debt coverage ratio is used to determine if the company has the ability to successfully service its short-term debt obligations by using the cash generated from operations which is calculated by dividing the income from operations (from cash flow statement) by current liabilities or short-term debt (from balance sheet).A ratio of 2 or more indicates that dividend is secure and that there is enough cash to offset any liquidity concerns raised from calculating the quick ratio. Hope this article will help you to easily research about the dividend stocks as a well-researched dividend stock can be held on for long periods of time providing a continuous stream of inflation-adjusted income.

dividend stocks | dividend yield

The post Finding the Best Dividend Stocks appeared first on General Article Directory.

Previously in England and then in United States, Preferred stock was used by companies as in building railroads and canals. These companies feel the necessity of more capital possibly made as or it may be brought up as ordinary equity, but their borrowing capability was limited due to the trend of keeping a piece of guarantee of the day in which each loan required. (Separating a railroad line into segments would yield nothing of value.) As a result, the concept of preferred stock was developed, which keep some but not all the rights of debt.

In general business organizations, Preferred stock is taxed in the same way as common stock that receives the double tax collection of dividends. Rather than individuals, corporations receive better after tax-returns from preferred stock, thus corporations are allowed to cut back from their income mostly from the dividends received. Likewise preferred interests in partnerships and LLC’s frequently go through an amount of income based on the preferred return.

Debt and equity are the two classic source of capital for a business. But these are not the only forms that an investment in a company may take. Especially, preferred stock shares with debt the concept of a predictable return paid annually, as well as a right to repayment before of the common equity. Generally, the par value of a preferred stock is generally the amount of its liquidation preference, and the annual dividend is generally declared as a percentage of that figure. In spite of all preferred stockholders cannot carry out actual payment of their return as in first concern of paying back they stand lower than creditors.

In transaction form preferred equity can also be combined with different structure/pattern of investments. From several tools, preferred equity is one of the tools that is used to put together the collection/quantity of rights and returns that gives up a right transaction acceptable to both sides.

Further, the dividends paid from investing in preferred stocks are of a different type and generally considered as a greater investment than that of common stock. Before investing money in preferred stock, you’ll have to know when to except the dividends which are paid often. In matter for common stock, these stocks are decided by company’s board of directors that whether to pay or not, a dividend on a stock. Because of this element, these stocks generally don’t fluctuate as often as a company’s common stock, and sometimes it is also known as a fixed income security. Another fact of this fixed income is that, dividends are generally ensured meaning that if the company misses a payment, it will be required to pay it before any future dividends are paid on any stock.

preferred dividend | preferred dividends

The post Preferred Stock- Debt and Equity appeared first on General Article Directory.

Preferred shares are known as a type of stock, they are really more of a cross between a stock and a bond. Preferred stock may also be “callable,” which means that the company has the option to purchase shares back from their shareholders at any time, usually at premium price. Preferred stockholders generally do not have voting rights but they have a greater claim to the company’s assets because preferred stockholders have the ability to recover the investment upon a liquidation or sale of the company. If the company has excess cash and decides to distribute money (dividends) to its investors, the owners of the preferred stock can beneficial. Another reason that investors purchase preferred stock is to receive rights, preferences and privileges senior to common stock. The most important economic right of preferred stock is the ability to recover the investment upon a liquidation or sale of the company.

All preferred shares have a negotiated fixed dividend amount. The dividend is usually specified as a percentage of the par value or as a fixed amount. A stock\’s par value is the lowest amount of money at which a company can sell a stock.  Before buying any preferred share make sure that the track of the company is good, check the annual report and independent analyst’s assignments then buyers can directly bid the price of the preferred share through his/her account.

Dividends can be cumulative, which means that if they are not paid in a particular year then they will be carried forward.  For example, if a company issues preferred shares with a purchase rate of $100 and a cumulative dividend of 5% per year, or $5. If it is unable to pay the $5 cumulative dividend to shareholders in year 1 for any reason, it must pay a $10 ($5 + $5) cumulative dividend in year 2. Preferred stock dividend can have tax advantages for corporate investors, which is one reason they are the primary purchasers of preferred stock. In calculating return on equity, preferred dividend should be subtracted from net income so that the return to common shareholders is accurate.

The variation is endless. Due to the individuality of the preferred stock field, we must stick to generalizations. However, overall, purchasing preferred stock is still considered a wise investment choice.

You may find that a preferred stock has a date of maturity, which is when it must be traded for cash or converted to common shares. Some preferred stocks do not have a maturity date. Others allow the shareholder to make the decision about when to cash or convert their stocks. Like every type of investment, there are both positive and negative things about preferred stocks. If you are not sure, consider using the services of a professional financial advisor. This type of professional can help you figure out if this type of stock is right for you, and help choose companies in which to invest based on various reports.

preferred stock list | canadian preferred stocks

The post Preferred Stock – Securities for Common Stocks and Bonds appeared first on General Article Directory.