Do you want to buy the high or best dividend stocks? Every Industry Sector has certain dividend paying stocks that are the best stocks to buy for dividend income. However, some sectors feature higher or more secure dividends than others.
The Energy and Basic Materials sectors are two places where you can find some of the best stocks that offer a high dividend yield.
Several of the companies in these sectors are LP’s, (Limited Partners), or MLP’s, (Master Limited Partners), that are required to pay out at least 90% of their income to “unit holders”, in return for not paying corporate taxes.
One key thing to check right off the bat is the firm’s dividend payout ratio, in other words, how much of their earnings are they paying out in the form of dividends. You should also look at their dividend growth rate over the last 5-10 years, if possible.
For an LP or MLP, beware of firms where the dividend payout ratio goes above 100-110%, depending upon how they treat depreciation.
For other firms, excepting REIT’s, you may want to screen for dividend payout ratios below 65-70%. Another metric to check out is the firm’s operating profit margin. Is it substantially higher than their dividend yield? If not, they may eventually have to cut their dividend, since their current margin can’t sustain their current yield.
REIT’s are another specially classified firm, which also pays out 90%-plus in dividends, in exchange for not paying corporate taxes. Due to this arrangement, you’ll find many high dividend stocks in the REIT sub-sector of the Financials sector. You can also visit some reputed websites for getting the more information about dividend stocks.