As much as I’m captivated by a good tale of gloom and doom, I’m also a skeptic.
So after seeing lots of stories recently about how dividend stocks are overpriced, why they’re bound to take a tumble, and why dividend investing is a style whose time is about to be over, I’ve started to think that maybe things aren’t as bad as lots of people think.
What to Watch For
To be sure, there are clear danger signs that should alert potential dividend investors to steer clear of certain stocks. The big one is whether the company is earning enough to pay a dividend. Once you scrape away any accounting tricks (which sometimes isn’t so easy to do), it should be clear that a company’s per-share earnings are greater than what’s paid out in the form of dividends. It’s kind of basic, but despite whatever rationale a company may offer for paying out more than is coming in, be cautious.