Investing For Dividends

Investing for dividends can allow you to make a nice consistence cash flow from your investments.  So what should you look for when finding long term dividend plays?

1.       Strong Companies

The company has to be pretty stable to say the least.  If a stock goes down 50% it doesn’t matter that you got an 8% dividend.   So, only strong companies, or diverse ETFs should be bought if you are going to hold it for a long period.  It is important to look for low risk investments with this strategy.

2.       When Stocks are undervalued

The best time to buy long term stocks is when stocks are undervalued.  This way you are not getting into a stock that is many times above its true value. 

3.       When stocks aren’t going down

Of course you don’t want to buy stocks that are just going to go down.  I don’t like to catch a falling knife, because it can cut your account in half or worse.  Dividend stocks are best looked for when there is at least some sort of stability in the stock market.

4.       It should offer dividends

Good dividend stocks should, of course offer dividends.  Not all stocks do, so you should check its history to see if it has been paying and how much.  You might also want to make a minimum you would be willing to accept before you buy the stock.

5.       Does it offer options?

Does the stock offer options on it?  Personally I don’t like getting into long term plays unless the stock does indeed offer options.  This way I can sell covered calls on the stock and get in another monthly premium from it.  This is big for me because more often than not the cash flow you get by selling calls will trump the cash flow you get by dividends.

 And if you are buying the stock for cash flow why not be able to profit from both.

For an ideas to look for when investing for dividends visit http://www.stocks-simplified.com/Gordon_Growth_Model.html