How An ‘Income Watch List’ Can Help You Find The Best Dividend Stocks

Written by John Stuart on August 19th, 2016

How An ‘Income Watch List’ Can Help You Find The Best Dividend Stocks

Dividends are a gold mine!

Did you know that a portfolio that reinvests its dividends receives an affect 85 times greater than a portfolio that doesn’t, even if they both hold the exact same stocks?

We’re talking about some serious growth right there!

Find the right dividend stocks and you basically get paid to invest (without selling your stocks).

The problem however is finding these gems.

Where do you look?

How do you know who’s going to grow their dividends and who’s going to cut them?

Where do you even start?

Thankfully I have a simple technique that you can use to ferret out the best dividend stocks on the market.

All you need to do is build an ‘income watch list’ and finding these gems becomes simple and stress-free.

Let me show you how…

 

BONUS: Find the best dividend paying stocks on the market using my 5-step checklist! It's all in this FREE guide: 

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Finding The Best Dividend Stocks On The Market

 

There are over 400 stocks listed on the Johannesburg Stock Exchange.

So how do you go about whittling them down to the best dividend paying stocks you should be watching?

Well, that’s where a company’s dividend yield (DY) comes in.

It’s simple to use, and even easier to understand.

Just divide the company’s annual dividend payments per share by its current share price.

The calculation looks like this:


Dividend yield (DY) = The annual dividend payments per share/current share price


Naturally if you find the answer is 0 that means the company doesn’t pay a dividend.

You obviously don’t want to focus on these companies, and you exclude them from your watch list.

If you find the dividend yield is somewhat high, that can suggest that the company rewards investors with a considerable dividend.

At the end of the day, the dividend yield simply means that the higher the number the great the dividends are with regards to the company’s current share price.

However, you need to keep in mind that an extremely high dividend yield could suggest a company can’t sustain their dividends and it could be cut.

But before we get there, you need to construct your watch list…

 

 

How To Build An ‘Income Watch List’


Now the one thing you need to know is that a company’s dividend yield is somewhat limited.

Whilst it is handy, you need to dig a little deeper for more information on whether or not you should invest in a company for its dividends.

What it is great for though is to build an ‘income watch list’ – IE a watch list of dividend paying shares you can keep an eye on.

Remember, as I’ve touched on above, an extremely high dividend yield could mean a company cannot sustain their dividend payments.

Which is why you want to root out stocks and companies who have a history of consistent dividends.

You also need to keep in mind that there are even some stocks whose high dividends don’t mean ‘doomsday’.

These include preference shares and listed property stocks (otherwise referred to as REITs - Real Estate Investment Trusts).

Once you’ve constructed your income watch list, you need to update it regularly and keep an eye on it.

Not only do you get to whittle down the market to the best income paying stocks, but you can start to get familiar with the consistent dividend payers too.

With the dividend yield being somewhat limited, you do need to do a bit more research behind the stocks that make it onto your watch list to get to the final dividend stocks you want to buy.

These could include a company paying consistent profits over time, that have solid balance sheets, that have a history of paying out increasing dividends, and companies with a decent free cash flow.  

 

The Simple Secret To Unlimited Stock Market Payouts


Dividends, when used properly, have the power to seriously boost your portfolio, and your wealth.

But with hundreds of stocks on the market, you need to whittle them down to the best dividend paying stocks.

That’s where the dividend yield comes in.

However, because it doesn’t give you the full picture you need to make a final decision, you can use it build your ‘income watch list’.

You do need to dig a little deeper when it comes to the stocks you’ve listed down, but your watch list is a great way to make sure you’re only focusing on the best potential dividend stocks on the market.

You also get to familiarize yourself with them at the same time.

Now, if you want to find the precise dividend stocks from your watch list that you simply have to invest in, you need my 5-step dividend checklist. 

It's free, all you need to do is download it, and you'll uncover the best dividend paying shares for your portfolio in 5 simple steps. 

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Until then, here’s to profitable investing. 

John Stuart

John Stuart
Content Director
The Money Lab