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How to Identify Stocks that Pay High Dividends

Charlie S Jan 1, 2019
Many global equity investors look for stocks that pay high dividends consistently. Here, we shall discuss how to identify such stocks based on certain indicators.
With the global stock markets having gone up considerably from their lows, the number of people taking interest in equity investments has shot up again.
While choosing stocks, doing some research is of prime importance, and investors should look for those that are fundamentally stable and sound. Financially strong companies are known to pay attractive dividends to their shareholders which adds to their earnings considerably. Let us first understand the basic concept of dividends in the next section.


Dividends are the monetary payouts made to the shareholders of a company from the net profits earned during a particular period. Generally, they are declared after the quarterly or yearly financial results. They are paid on a per share basis and the amount per unit is decided by the board of directors.
More number of shares you hold, more would be the dividend amount you get in your account. It wouldn't be wise to expect dividends from companies which are in losses on operating levels or have a high debt burden. Firms with a healthy amount of cash in their balance sheet and decent cash flows quarter-on-quarter will succeed in paying effective dividends.
History reveals that industries such as information technology, financial services, and automobiles have consistently distributed good dividends to their shareholders. Here are some factors to consider when looking for a high-yielding stock.

Past Dividend Paying History

It is possible to identify scrips that will provide good dividends in the future, by referring to their past trends. A profitable company always distributes a share of its earnings to keep the shareholders' confidence alive.
It also assures the business community that the company is doing well, and is on the right track as far as growth is concerned. Past dividends paid can be found out by referring to websites related to the stock market or from popular business magazines.

Consistent Net Profits

Stocks that pay high dividends would be those who earn a strong net profit every quarter. The dividend yield percentage is a good indicator to identify a high yield stock. Generally, companies with a 5 - 10% yield are considered to be high yield stocks. These firms provide a steady source of income, and have a strong growth potential.

Huge Stake Sales

Companies which have sold a large stake to other companies or institutional investors, can pay high dividends due to the sudden and huge inflow of cash through the sale. You should keep an eye on big deals executed by companies and try to find out which firms have earned abnormal profits in the past few months. The chances of getting a payout are high there.
These factors will certainly help you to identify shares that pay good dividends. However, it cannot be the only criteria for investing in equity. You also need to analyze whether you will get a good price appreciation, capital protection, and the opportunity to earn bonus shares.
Disclaimer: This information is for reference purposes only and does not directly recommend any specific investment choices.