Do you like dividends
How about high dividends?
If you answered yes to both questions, you’ve come to the right place!
I recommend that you spend the next 5 minutes of your life reading this article. You will be worth it – I promise. 🙂
Let’s start with the obvious question …
What is a high dividend?
I usually think about everything over 4% be a high dividend.
Some people agree, others disagree.
What is certain, however, is that you will be golden if you get a 4% dividend and a 6% appreciation.
That means you get an annual return of 10%what makes up your money very quickly.
According to the rule of 72, your money would double every 7.2 years.
Divide 72 by yield to find out quickly. This is a very practical rule!
Before you scroll down to the end of this article, open your brokerage account, and prepare to buy, it’s important to make one thing clear.
Pay attention to very high yields!
They are almost always a trap. They will look very appealing and create feelings of “easy money” … But they are the opposite.
I often see people saying things like:
“This stock has a return of 14%! That’s a guaranteed return right there! “
You only buy the stock because it has a high return.
No research, plan, or logic. Please don’t be one of these people!
What often happens is that the company doesn’t make enough money to cover the very high dividend and is forced to cut it.
What follows is a sharp drop in the share price and immediate regret.
While these people received their 14% dividend, they had to sell their shares at a 30% + loss, making this a very bad investment.
Focus on the payout ratio
A quick way to make sure you don’t get into a revenue trap is to look for a very important metric.
It’s called that Payout rate.
You get it by dividing the dividend per share by earnings per share.
It shows you very quickly how much money a company pays in dividends compared to the money it has earned.
- If this is over 100%, it is bad news – the company cannot cover the dividend and often has to use debt.
- Anything over 70% is risky and a bad year could jeopardize the dividend.
- The sweet spot is between 40 and 60%.
Finding the payout ratio is a quick way to check if the dividend is safe.
The next time you see a dividend of more than 8%, check the payout ratio.
But let’s go further …
Would you like to know what types of stocks offer high returns and low payout ratios?
Blue chip stocks
In poker, the best chips are blue.
There are fewer of them and they have the greatest value.
For this reason, some shares are also known as blue chip shares.
They are companies that are large, stable and very resilient to a bad economic climate.
And guess what?
You are the exact types of companies you want to invest in!
If you focus on investing in high quality companies, you know that you are in good hands.
Examples of blue divid stocks with high dividends
Now let me introduce some blue chip stocks that might be worth a look.
All of these are Dividend growth stocks.
That means they have increased their dividends every year in the past. These are some of the best investments you can make.
Westrock Company (WRK)
A packaging company that is enjoying the rise of e-commerce mainly thanks to Amazon.
At the time of writing, it bears a high dividend yield of 5.1%. That’s high no matter where you look at it!
And the payout ratio?
It is currently only 55%, which means that Westrock has enough room to further increase this dividend. Not to mention the expected price increase!
PPL Corporation (PPL)
A utility company that provides electricity to 10.5 million people. A business model that creates great dividend growth stocks!
At the moment you are getting a good a 4.7% dividend yield with a payout ratio of 67%. Not the lowest yield, but very decent.
The highlight at PPL is that it has been increasing its dividend every year since 2002. Impressive! 😄
Prudential Financial (PRU)
This Fortune 500 company offers insurance and investment management services.
To be honest, I really like this stock because of its excellent metrics:
The big one comes first Dividend yield at 4.6% …
Then there is the low payout ratio of 43% …
After all, it has increased its dividend by an average of 13% in the past 5 years!
Together, these three factors create a powerful cocktail of growth and prosperity. Exactly what I like to see!
Don’t just focus on yield …
While it might be tempting to track the return to get immediate returns, I would recommend you not to.
Blue chip stocks with high dividends definitely have a place in every portfolio. They are particularly useful when you are approaching retirement age.
However, it’s important to build a diversified equity portfolio that also quickly increases dividends.
This is exactly what you will find out in the guide that I have prepared for you.
It’s free. It’s good. It goes fast.
Would you like to know how to start dividend growth investing? Then this PDF guide is the perfect starting point.
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