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Dividend investing is a very popular method because it helps people invest in the stock market and get a monthly income from it without having to spend a lot of time trying to figure out how to pick the short term tops and bottoms.
It is many times easier to go look for a list of dividend stocks and buy the strong ones then it is to spend hours trying to pick the tops and bottoms of the market. It is also much less stressful.
So, what are some things you can look at in order to find the best stocks that offer dividend? Well one nice ratio you can look at is called the dividend yield ratio. This formula tells the investor what the stock is paying in dividends when compared to the price of the stock.
For instance if the stock is paying out $5 in dividends every year and is trading at $100 that means that the dividend yield ratio would be 5%. This can help an investor find a stock that meets their minimum desired rate of return.
So, if you want to make a minimum of 5% off of your money one way to do this is by simply looking for dividend stocks that have a dividend yield ratio of at least 5%. However this is in no way a guarantee that you will indeed make at least a 5% return on your money by doing this. After all the market is still a roller coaster ride, but it is the closest thing to a guaranteed return that you can get.
There are also other more complex ratios such as the dividend payout ratio and the Gordon growth model that an investor can use to help them decide what makes a good dividend stock.
But just remember, a stock that pays high dividends does not mean that it is a good investment. Looking at the company can also help you reach your investing goals. So while dividends are not the only thing to consider when making a long term investment they can be very helpful.
