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The Dividend Aristocrats - The Best Dividend Stocks-


									Presented by Daniel Toriola
Choosing the right Stock is a very complicated process and investors have different approaches. However, it is wise to follow general steps to minimize the risk of the investments. Click here to know more

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The Dividend Aristocrats - The Best Dividend Stocks? By Robert Hauver

? As a tool for creating steady passive income, the dividend has stood the test of time. Studies show that from 1926 to 2004, dividends accounted for 35% of shareholder returns. However, after adding in the powerful effects of reinvesting the dividends and compounding, dividends returned over 25 times more than price appreciation. During the tech bubble/ boom of the late 90's, many investors ignored dividend paying stocks when looking for the best stocks to buy. However, that's no longer the case, as now, even many tech companies have begun paying dividends. In fact, since 2003, CNN reports that "there were over 100 dividend increases and initiations among tech firms, vs. 4 dividend cuts. Initiating dividend payouts helped these companies to win back investor confidence soon after the Internet bubble burst." So what makes this group of dividend stocks so special? After all, not every dividend stock is worth buying, even if it pays a very high dividend. As a matter of fact, an abnormally high dividend yield can often be a warning signal to income investors to avoid a stock, even though it may have the highest dividend in its peer group. What distinguishes the S&P's Dividend Aristocrats group is that these are stocks which have increased their dividends for the past 25 consecutive years. Remarkably, some of these companies have increased their payouts for over 50 years running. These are stocks with a long, steady history of dividend growth, to say the least. Logic would also suggest that any company that can make these consistent increases, must have a strong business model, with ample cash flow to support their payouts through both good and bad economic cycles. However, since the economic downturn of 2008-2009, some of these firms have actually cut their dividends, and will be eliminated from this group next year. So, which companies in this group are actually the best stocks to invest in? Should you just pick out the ones with the highest dividend yield, or is there another way to find the best dividend stock for you?

First of all, take a look at the industry sectors: Are there attractive stocks in a beaten-down or currently
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lagging sector, such as health care, or utilities? For example, these 2 sectors are only up 6.5% and 7.1%, respectively, in 2009, whereas the basic materials sector is currently up over 27%! As a value investor, you may want to seek out stocks who haven't made huge dramatic runs up to new highs, but, rather, have been somewhat left behind. The trick to this strategy is making sure that the stock or its peer group doesn't have serious internal problems, or external problems. For example, tobacco companies were steady stocks to invest in for years, until the related health problems emerged. Always compare a firm to its peers to get a clearer picture of its strengths and weaknesses. A good place to do this is the clearstation website, which has a feature called "key ratios", with which you can compare a stock to its industry, sector, and the S&P simultaneously. You'll see comparisons of many metrics, including: market cap, sales per employee, dividend yield, dividend growth rate, return on assets, return on equity, return on investment, p/e, price to book, price to cash flow, debt to equity, and many other metrics.

Want to see a list of all the Dividend Aristocrats and their dividend yields? Visit Robert Hauver's Dividend Aristocrats blog at Hub-Pages: Llc Forecast Services for Stocks, Futures, FOREX and Indexes. Over 89% accuracy for 15 years. Page 2

Presented by Daniel Toriola
The Best Dividend Stocks - Why, Where and When - Part 1 By Robert Hauver

Why are income investors constantly trying to find the best dividend stocks? Where can you find the best stocks? When is a dividend too high to be safe? We'll try to answer these and other dividend questions in this article. Dividend Yields: Income investors are always seeking to improve their dividend yield, either by searching out and investing in stocks with a high dividend yield, or by selling covered calls against their dividend paying stocks to augment their dividend income. Why is a dividend so important to the average investor? Here are two illustrations of why dividends are very important to the average investor. 1. In a study of the period 1926 - 2004, it was shown that dividends accounted for 35% of shareholder returns. Pretty substantial, right? Wait, it gets better... When you add in the effect of compounding and reinvesting, dividends returned over 25 times more than price appreciation during this period. Let's look at this from a different perspective, in another time period: 2. During the period 1986 - 2005, $1.00 invested in the S&P 500 had $.45 in price appreciation. If you include reinvested dividends, however, that $1.00 would have earned $8.09, 18 times as much as mere price appreciation. Where Can the Average Investor Find the Best High Dividend Stocks? Certain industries tend to pay out higher dividends than others. Some examples of this are: The Shipping Industry: Because this group is so volatile, they've gravitated toward enticing investors with historically high dividend yields. However, "look out below!", as they say on board ship, because these stocks can take you on a roller coaster ride that will make you long for dry land. Telecoms: This group also tends to feature high dividend paying stocks. As with any stock, you have to dig deeper, to find out which ones are worth investing in. Currently, the big trend in telecoms has been toward wireless, so companies that are strictly land-based have been somewhat out of favor with investors, who feel that the customer trend toward cell phones is definitely outstripping traditional land lines. REIT's, (Real Estate Investment Trusts), are pooled funds of money, that have been organized to invest in various types of real estate, such as shopping malls, or apartment buildings, or health care facilities. REIT's don't have to pay corporate taxes, but they must pay out at least 90 % of their earnings to shareholders. There are many high dividend stocks in this group. Their dividend distributions don't qualify for the 15% qualified dividend tax rate. The current 2008-2009 credit and economic crises have caused many

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investors to flee from this group, due to financing and debt leverage worries. Look for well-financed companies, in an industry that is more insulated from the economic cycle, such as health care. MLP's (Master Limited Partnerships): There are many independent oil stocks, natural gas stocks and pipeline stocks in this group, which pay a high dividend yield. MLP's are obligated by law to pay out at least 90% of their earnings to "Unitholders", (shareholders), in return for not having to pay corporate income tax. Their distributions do not qualify for the 15% qualified dividend tax rate. This group holds a lot of promising dividend stocks for income investors, particularly those companies which already have or are investing in more pipeline infrastructure to handle the coming natural gas boom in the U.S.

When is a dividend yield too high? This is a constantly evolving issue, since stock prices and yields are always changing. In fact, the market declines of 2008 and early 2009 caused many "average" dividend yields to soar, as companies' stock prices declined. In addition, many companies cut their dividend in order to save cash. Currently, the average S&P 500 dividend yield is 2.57%. However, you should look within each group's sub-sector, and compare yields there, in addition to comparing other key metrics, such as dividend payout ratio, debt levels, and current stock valuations. We'll cover more details of the "Where and When" for choosing the best stocks to buy, in part 2 of this series.

Robert Hauver publishes a Dividend Investing blog, called "High Dividend Stocks".  To find out more information on how and where to find the best dividend stocks, visit:

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