How to Find Companies With Good Dividends

  • Look for stock with a high dividend yield.  This is the company’s dividend expressed as a percent of the share price.  For example: If a stock is selling at $100, and pays $5 annual dividend, its yield would be 5% (100 ÷ 5 = .05%).
  • Find companies that have historically raised their dividends.  This is an indication of a well managed strong company.
  • You need a company that makes a profit in order to get a dividend. Look at the Return on Equity (ROE) number (see Stocks: Buying, Selling & Researching). ROE looks at net income to shareholders’ equity.  Look for companies with rising earnings. 
  • Larger more mature companies tend to pay more dividends.  However, look for the ones that have low debt levels.  To determine this look at the debt-to-equity ratio  al (see Stocks: Buying, Selling & Researching) so called debt ratio. 
  • If a company increases its dividends this would signal that management is optimistic about the company’s future profits.  It also would probably cause the stock price to rise. 
  • If a company decreases or eliminates dividends, it would signal that management is concerned about the company’s future.  This would probably cause the stock price to go down. 
  • Usually a company with one or two bad quarters will not reduce their dividend.  If they do, as mentioned above, they are probably in trouble.