The Iconoclast Investor

Here’s another question I received recently. Again, feel free send us any questions you have and keep checking back to see them get answered.

Question: I’m looking at a ton of stocks that are now sporting dividend yields of 4%, 5%, even 7%.  Do you think it’s a good time to begin nibbling on these shares?

Answer: This is sort of a corollary of the last question.  However, dividends are more meaningful than earnings because they put cold, hard cash in your pocket.  It’s true that many big investors often support stocks that show big yields, even during tough markets.

If you’re delving into some of these names, you should favor dividend stocks that have stabilized for a few weeks, and that have shown some increases in sales and earnings in recent quarters, as well as stable, solid projections going forward–no small financials or steel stocks, thank you.  It’s not as easy as simply buying the biggest yield you can find; in fact, the highest yielders are usually among the riskiest investments.

However, for the investor with a broad portfolio–and who’s already holding plenty of cash–nibbling on a few stable dividend payers now that the market is down 40% from its highs could work out well.  One stock that intrigues me on this front is Verizon (VZ), a huge Dow component that reacted well to its earnings report this week, and has a yield of nearly 6%.  Take a gander if you’re interested. More information can be found about dividend investments here.