|By Nathan Young|
April 20, 2017
When looking to invest in companies, and item you should be looking for is dividends. A dividend is simply money returned to shareholders and is usually paid when the company is performing well. Not all companies give dividends, but it certainly is a welcomed addition many investor seek. Specifically, you want to look at the last dividend paid and determine if it is inline with previous payments are has changed either up or down. Typically, you want to see dividends remain constant or increase. If a dividend begins to decrease, this could signal the company needs the extra cash to go elsewhere.
A decreasing dividend could indicate a simple cash flow issue that needs to be corrected by pulling back dividend payments. Another issue could be sales have declined and there is not enough excess cash to pay toward investors. Again, if the dividend amount begins to fall, you should take a good look at the fundamental data and understand what their reasoning is. Not every time will it be something bad, but it certainly is worth your concern for the short term.
Dividends are usually paid quarterly, but can also be paid monthly or annually. There may also be a surprise dividend if the company has a better than expected quarter, which then leads to a higher sense of confidence that company can continue growing at a healthy pace. It may not be necessary to find dividend paying stocks as there are plenty of well performing companies that do not issue dividends. Be sure to look at your current investing strategy to see if dividends will benefit your current situation and if you still have questions, consult an investing professional and they can help to point you in the right direction.
|Nathan Young is a Senior Member of Macroaxs Editorial Board - US Equity Analysis. With years of experience in the financial sector, Nathan brings a diverse base of knowledge. Specifically, he has in-depth understanding of application of technical and fundamental analysis across different equity instruments. Utilizing SEC filings and technical indicators, Nathan provides a reputable analysis of companies trading in the United States. View Profile|
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