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Creating a Portfolio Like Warren Buffett: A High-Return Investment Strategy by Jeeva Ramaswamy

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CHAPTER 12

Stock Research Checklist—Dividend

If a business operates with stable cash flow and pays cash every quarter and the management does not have the opportunity to reinvest in the business, they can pay the dividend to the shareholders. If you are looking for income from your stock portfolio, you can select companies that pay conservative dividends and hold those stocks for the long term.

If You Are Buying the Stock for Dividend, Make Sure the Company Pays the Dividend Without Interruption and Has a History of Raising Dividends

When you are looking for good dividend companies to invest in, look for the following characteristics:

  • The company should be an established company and should produce stable cash flow for a long time.
  • The company should not have rejected or reduced its dividends at any time in its history. Businesses have to go through different economic cycles all the time—like economic expansion, slow downs, recessions, and depressions—and the company should have survived in all the difficult economic cycles.
  • If the company has a history of repeatedly raising dividends, it is a great company to invest in for dividends.

For a higher dividend yield, dividend investors need to look for market sell-off to buy stock in dividend-paying companies. In the fourth quarter of 2008 and the first quarter of 2009, a lot of dividend-paying stocks were reduced to very low prices. Whoever bought the shares at those low prices might have captured the highest dividend yield.

There are ...

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