Categorizing the many thousand listed companies that pay dividends and trade in the American Stock Exchange, New York Stock Exchange, and Nasdaq will be difficult, not impossible. Nevertheless, listing them in clear-cut groups for investment purposes is important. Your minimum dividend requirements, along with the company’s financial progress, liquidity and solvency ratios determine the type of dividend stocks you should choose.
Low yielding stocks, the first in this series, are issued by companies that are still in their growth stage. Their stock prices may be high and a good time to buy this kind of stock would be when there is a decline in the market. These companies have invested capital, earned profits and reinvest a part of their revenue back in the business for its advancement. This should form one part of your stock ratio because these low yielding companies with a low payout ratio display that they are returning the funds into the business for expansion, which is a good sign for shareholders. It is important to have a close watch over their performance to ensure there is continuous, if not rapid growth.
Medium yield dividend stocks are issued by companies that are established and well-settled and have acquired a good brand value for themselves. They ordinarily bring in a steady stream of the dividend because these companies do good business. Hence infuse large sums of money to do research – both to expand their product and service range to benefit customers, and explore possibilities to earn more revenue through mergers and take overs of competitors or sick businesses that are associated or complementary with their ventures. You, as an investor, must observe to see if their growth is at a steady pace, without stagnating or worse, deteriorating.
High yielding stocks, the last type, are issued by mature business enterprises that are involved in important industries of significance. Their investment is high, growth period is extended, and returns are substantial. Their dividend stocks are valuable in the long run as a reliable, dependable and safe investment with high yields.