Dividends storm

Right now, most of the companies are infatuated with dividends.


It's the new trend of the year 2010. It is de facto imperative to dish out dividends to the investors in order to keep them investing in the company.


In this dire state of the economy, investors are all looking for safety nets that pay the most dividends. There are a group called the "Dividends Aristocrats". Some of the famous ones are Pitney Bowes, Mcdonald's, Walgreen Co., WalMart and Coca Cola.

What do I mean by "Dividends Aristocrats" ? Well, simply put, they are companies that pay increasing dividends for a minimum of 25 years, without a single break in the streak. That's what I call impressive.


I mentioned this group mainly because of the fact that a lot of emasculated and floundering companies are now trying to join in the game. They are paying high yields as well to attract gullible investors into their companies. They need the funds desperately so they used high yields as a small trade off. However, these companies are extremely dangerous because they might just fail the next day.


Hence, here's a caveat to all the investors out there, whether the precarious ones or the timorous ones. Few things to look out for when you are investing in companies.


1. Make sure that they have a copious amount of funds in their balance sheets and that their debts are low.


2. Make sure that they pay dividends for at least a decade or so. If there happen to be a break in the streak, find out the cause and make a sound judgement on that.

3. Make sure that the company is a conglomerate, a big company that is extremely sustainable in today's market. Do not bet against those that are merely a fad or dying ones or even the saturated ones.


4. Last but not least, look out for the expansion opportunities and acquisitions of the company. If they happen to make a ridiculous and abysmal investment, then you might be the one paying the price.

So do not be beguiled by companies who pay high yields, do analyse them, scrutinize them before investing.


Be more cautious and do not take the bait so easily!

Credits -forexcare, -theglobeandmail, -btinternet