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First video in a series helping you build the perfect dividend portfolio and live off your dividends. I’ll be covering every dividend type and strategy from high yield to dividend growth, monthly dividends and ETFs. In each video, I’ll show you five dividend stocks to consider then reveal my favorite, the stock that’s in my dividend portfolio.
The first thing I do when I find a new dividend stock, especially a high yield stock, is check its dividend history for growth or cuts . On the moomoo app, you find this by going to Summary on any stock page and scrolling down to Dividends. You’ll find the entire history of dividend payments including increases and decreases.
Now dividend cuts do happen with these high yield stocks but you still want to find those that don’t cut regularly and then increase the dividend when possible.
I’ll also check the stock for its payout ratio or cash flow coverage and then compare it to other stocks in the same industry. The payout ratio is just the dividend per share divided by the earnings or profits per share for the stock. For REITs, BDCs and MLPs; you need to use a cash flow coverage ratio like funds from operations. Comparing the coverage ratios against others will help you find the stocks with sustainable dividends and those with room to grow their payout.
Finally, I’m also looking for an upward trend in revenue or cash flow on the company’s financial statements . A company that can’t increase sales or cash flow won’t be able to increase its dividend and might eventually have to cut.
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Joseph Hogue, CFA spent nearly a decade as an investment analyst for institutional firms and banks. He now helps people understand their financial lives through debt payoff strategies, investing and ways to save more money. He has appeared on Bloomberg and on sites like CNBC and Morningstar. He holds the Chartered Financial Analyst (CFA) designation and is a veteran of the Marine Corps.
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