How to pick good dividend stocks part 1

How can we find good dividend stocks to invest in? A good starting point is simply paying attention where we spend our money. What products or services do we like and use? Certain brands & services we have been constantly using in our daily life.

There are questions that I would always ask myself before I invest.

Do we understand what this company does to earn its profit? If I can’t understand, I will move on and find something I understand to invest.

The next thing I will look at is the company historical earnings and dividend history. This information can be found online subscription or in the annual report especially the past 5 to 10 year’s financial summary. From there, I’m able to get a quick snapshot on the earnings and dividends that have fared over the past decade. I prefer companies with consistency earnings and dividend records.

For any investment, I make sure that I’m not paying the expensive prices for the shares. I always want a bargain after valuing it using the price multiple (PE, PB, PEG, EY, DY, etc.), discount cash flow model or dividend discount model.

At times to get some good deals, it will be useful to look for bad news that is temporary that will drives down the company share prices and gives me a bargain.

When the prices of the stocks are cheap, we will get a higher dividend yield and allows us to earn more income in terms of capital gain and dividend.

 I will share more information on how to pick good dividend stocks part 2 on the next post.