When investing in stocks, we typically look for sweet profits in price growth (buy low, sell high). But when stocks also pay a dividend, the extra gain can be icing on the cake. Who says you can’t have your cake and eat it too? Buying a stock that goes up in price and also pays a dividend is as sweet as it gets. Telecharts can help us slice through the technical and fundamental layers of the stock market to help investors can find great stocks to titillate their taste buds. And I love the taste of profits!

   The driving force behind price growth is earnings. Great earnings mean increased demand for a stock, and that drives up prices. But great earnings can also mean great dividends and steady payments into your account! One of the most powerful aspects of dividend investing is the fact that the best dividend payers tend to increase their dividends year in and year out. You want to see a positive dividend growth rate and a normal payout ratio. The payout ratio is the portion of earnings that are used to pay dividends to shareholders. Let’s face it, some companies like Microsoft make money, but seldom serve dessert to their shareholders. While a 30% – 60% payout ratio falls in ‘normal’ range, utilities and REITs tend to have higher pay out ratios.

   If you can’t tell the difference between a growth stock and a dividend (income) stock, trading can leave a bad taste in your mouth. Telecharts has two dividend-sorting features that I use regularly to find great opportunities. One feature is the dividend yield which is simply the lasted dividend paid divided by the price per share of the stock. Dividend Yield is reported in percent (%) return of investment. I sort stocks for dividend yield and look for the highest values at the top of the list. There’s no sense considering stocks that pay a dividend yield lower than the yield on a money market

   The other Telechart sort is the five-year Dividend Growth Rate. Dividend growth rate is a key to finding companies with consistent earnings that are regularly paid out to investors. Most investors lack insight into the growth rate of a stock’s dividends because the information isn't readily available -- it won't show up as the yield on your pop-up quote service. But Telecharts has the information right at your mouse-fingertip. Again, I sort for dividend growth rate so the sweet cream rises to the top. It takes a little doing to keep up with it, but trust me when I tell you its well worth the effort.

   "Great," you say, "but there are probably only a few “cake-and-eat-it-too” investments in existence, and it's nearly impossible to find them, right?" Not so. Let's look at a few real-life examples to drive the point home. (All results are approximate depending on the individual investor’s trade management plan, but you will get the idea.)

   The following are some of our TraderDoc live club trades: CPB pays a 2% yield. The entry was $27.50, and stock is now at $38.00. MSB was an entry at $14.00 (now $18.00) and it pays 9%. ALSK was an entry at $9.00 (now $12.00) and pays 7%. BLS was an entry at $29.00 (now $39.00) and pays 2.9%. GM was an entry at $20.00 (now $30) and pays 3%. Finally, MRK was an entry at $27.50 (now $41.00) with a dividend yield of 4%.

   Now for the icing on the cake. When we add the dividend gains to the capital gains (from the rise in price), we get a total gain of: CPB 30%, MSB 60%, ALSK 30%, BLS 30%, GM 60%, and MRK 40%. I also like a triple layer cake when I can get it. A “triple” is when you sell calls on the stock you own, and the option expires worthless. Then you get the capital gain, the dividend, and the options premium. Sweet!

Here are some new ideas to check out: CZN 7.6%, GTY 6%, VVC 4.5%, CPV 6.9%, T 4.4%, LTD 2.3%, ARLP 2%, and DRYS 5.6%. Remember, never buy a stock just for the dividend when the technical pattern suggests a fall in price is likely. We want dividend stocks to go sideways, or preferably, up.

Sometimes you can’t stop yourself from feasting on your cake and eating it too. But with stocks, you must stop yourself. Put a stop-loss on all stocks at all times and enjoy a dividend dessert whenever you can.

Email me for more information Candy@stockmarketstore.com  copyright and all rights reserved.

Candy Schaap