How to Invest in Stocks With High Dividend Yields

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By 02SmithA
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Dividend yields can boost your portfolio

Stocks with high dividend yields can boost your portfolio if you use them the right way. There are dangerous high yielding dividend stocks and then there are very safe mature companies with nice dividend yields. Learn how to invest in the companies with the safer dividends.

Difficulty: Moderate

Instructions

Things You'll Need:

Brokerage account
Money
Time for research

Step 1

High dividend yielding stocks aren't all equal, some stocks are simply yielding a high amount for the time being because the share price has fallen very quickly, while others are yielding a lot because they have a huge amount of cash on their balance sheet and they want to reward shareholders.
Step 2

What type of sectors typically have stocks that pay high dividend yields? Sectors such as the utilities sector, the consumer non-cyclical sector, as well as energy stocks. Bank stocks also offer high dividend yields most of the time, but right now their dividends are very in question so I am excluding them from the conversation.
Step 3

Ask yourself why would these companies pay this high dividend?

What is a dividend that you shouldn't trust? Don't trust a high dividend yielding stock that is losing a large amount of money and is having a difficult time raising capital. If they are having trouble raising capital, why would they pay a huge dividend to shareholders?
Step 4

What things should you look for in high dividend yielding stocks? Look for stocks with strong free cash flow and a lot of cash on their balance sheet. Look for stocks of companies that have proven themselves over time.
Step 5

One of the best things to do is buy into a stock that continues to raise its dividend each year. Each year Standard and Poors releases a list of Dividend Aristocrats which are companies that are raising their dividend consistently. These are great stocks to look toward. I have put a link to this in the resources below.
Step 6

Dividends are free money to you

Dividends are a great way to boost your portfolio over time. Dividends provide a nice cushion when the market is going down and extra incentive when the market is going up. Choose wisely and you can profit from high yielding dividend stocks.