Evaluating Dividend-Paying Companies

A company should be evaluated on three dividend attributes:

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.