About High Paying Dividend Stocks

Dividend-paying stocks are income-producing investments. They not only provide value in the form of increased share price over time, they also pay a portion of their earnings to their shareholders as dividends. Many of the good dividend-paying stocks are household names that have for decades produced high quality products that stand the test of time.

Function

Dividend-paying stocks could be good investments especially in times of harsh economic reality when the stocks are those of companies that do well. The dividends earned could possibly offset some of the losses incurred by being in the stock market. The best dividend-paying stocks are often those of companies with great value that have been paying dividends for decades. Think Procter and Gamble (NYSE: PG), Hormel Foods (NYSE: HRL), and McGraw-Hill (NYSE: MHP). Dividend paying stocks also have the added advantage of dividend reinvestment, which helps you plow back your earnings to buy more stock with added profits over time.

Considerations

While dividend yield and dividend payout ratios are key when deciding what high-paying dividend stocks to invest in, it is important to consider the type and the strength of the company behind the stock to ensure you are buying into something with a consistent dividend payout for the long term. For example, AT&T has a pay-out rate of 68 percent. It is the world's largest telecommunication company in terms of revenue and has been consistently profitable. This and stocks like it may be good ones to invest in.

Types

There are a number of high-dividend paying stocks out there. Some examples include Altria (NYSE: MO) with a 6.3% dividend yield and 76% payout rate; Pfizer (NYSE: PFE), 6.7% yield, 92% payout; Verizon (NYSE: VZ) 5.9% yield, 83% payout.

Expert Insight

A good time to buy high-paying dividend stocks is when the stock market is down, like it is as of this writing in November 2008. One high paying dividend stock for example, Pfizer (NYSE: PFE) is at the cheapest it has been in 11 years. Now would be a good time to buy for those interested.

Warning

It is important to note that divided yields are not guaranteed because the yield is tied to the price of the underlying stock. If the stock price increases, the yield increases and payouts increase. If there is a fall in price, the payout will be lower and this could be a sign that the company is doing badly. Always check to make sure that the company behind any dividend-paying stock is solid.