High Dividend Paying Stocks - Highest Yielding Dividend Stocks

This article discusses high dividend paying stocks - highest yielding dividend stocks.

Dividends are an excellent indication of the growth of a business-even more so than earnings. Earnings can be manipulated but dividends can't. They are real money, not figures on a balance sheet. If the dividend is rising year after year, you know that company is making profitable progress. See dividend for more information.

Although I feel strongly that a stockholder is entitled to some share of the profits, we don't select stocks on the basis of dividend income. Instead, we use dividend yield as a technical measure to identify good buying and selling areas. Over a long period of time, stocks generally fluctuate between perimeters of high dividend yield (marking a valley of undervalue) and plateaus of low dividend yield (marking peaks of overvalue). These perimeters seem to be rather consistent.
Each stock must be reviewed individually.

IBM is undervalued when it is yielding 4 % and overvalued at 2 %. Other stocks are undervalued when yielding 3 % and overvalued at 1 %.
We follow 350 blue-chip stocks-mostly NYSE-selected according to specific characteristics. Dividend yield measures value in stock market, but we measure the quality of an issue by six criteria:
1. We want the dividend to have been raised five times in the last 12 years.
2. The stock should carry an S&P quality ranking in the A category.
3. It should also have at least 5 million shares outstanding, to insure liquidity.
4. At least 80 institutional investors should be holding it.
5. We look for 25 years of uninterrupted dividends.
6. Earnings should have shown improvement in at least seven of the last 12 years.

A computer figures out the various yield levels that in the past have indicated undervalue or overvalue. All the stocks are then grouped into one of four categories: Undervalued, overvalued, rising trend or declining trend. A rising-trend classification indicates that although the stock has been undervalued, it has risen at least 10% from this undervalued base. In the declining-trend group, a stock has been overvalued but has declined at least 10% from an overvalued peak.

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People who want to buy stocks would be interested in the undervalued or rising-trend categories. People who own stocks would be interested in the other two to map out a selling strategy.

You don't have to do anything exotic or complicated to achieve superior investment results in the stock market. Simple formula: Buy stocks when they're undervalued and sell them when they're overvalued.

Now we will cover the subject of Investing In New Issues.
It's important to be selective when investing in new issues. What to look for:
The company should be an established factor in a popular and growing industry.
The managing underwriter of the public offering should be highly respected in the investment community. Big plus: The last few deals by the underwriter were successful and the stocks currently sell at a premium over the original offering price.
Stick to managements that have a proven track record. Read the offering circular closely to make sure that the company makes money now and has good prospects for growth.
The company should be raising money in the offering to expand the business. Generally speaking, avoid new issues intended chiefly to reduce debt or to cover general expenses.
Warning signal: Insiders plan to sell a lot of stock in the offering. Prospects for the future might not be that great if management gives every indication of bailing out.
Good signs:
• The managing underwriter takes warrants to buy shares at a price higher than the offering price. (No outsider knows the business's prospects better than an underwriter.)
• Major investment banking firms are in the underwriting syndicate.
• Well-known people are on the company's board of directors.
• Venture capitalists with a history of successful investments are involved with the company.
• The stock market environment is bullish.
No matter how good the company, a lousy stock market or economic environment can wreak havoc on the best of public offerings.
When to sell: Some investors sell their stock shortly after the offering, if the profit is substantial. This strategy is not recommended. The real money is made over a long-term period. A new issue should be looked at as a five- to ten-year investment. If the buy decision is made with care, holding should offer the most rewarding prospects.

Source: Consumer Information Center

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