1. Reliable dividend payment history
2. A record of increasing dividends
3. A relatively high dividend yield
A company's dividend history is factored into the company's stock price.
- One with a superior history of paying and increasing dividends will usually command a higher price than a company that has a poor record.
- A high dividend yield will often attract more investors to a stock, and this can translate into higher prices as investors buy up shares to lock in a generous stream of dividends.
- A track record of dividend growth is an important indication of the company's ability to grow earnings.
But beware of company with a high dividend yield that has an eroding earnings outlook. Remember, a company can only pay dividends from current or accumulated earnings. Without good earnings, there is good chance that the high dividend you covet may be cut.