In times of negative interest rates, dividend shares can be a sensible investment variant. However, there are some criteria to consider when choosing the best dividend titles.
Shares with high distributions offer a double advantage: the shareholders can benefit from both course increases and high distributions. High dividends can even serve as a buffer for price losses.
Dividend yield
When choosing good dividend values, investors must not make the mistake of only paying attention to the dividend. Rather, you should look at the dividend yield. This key figure puts the annual dividend in relation to the share price on the payment day.
Dividend growth
You should also make sure that a company is pursuing a sustainable dividend policy. This means that it is worth taking a look into the past and looking at dividend development over a longer period of time. The distribution does not necessarily have to be increased annually, but the trend should show a gradual dividend over the years.
Companies are not obliged to pay a dividend, you should never forget that. However, a good dividend history testifies to stable business development. In addition, reliable payments in the past are an indication that management attaches importance to a sustainable dividend policy and is therefore likely to continue to be a stable or even increasing dividend in the future.
Sales growth
Dividends are paid from the profit of a company. In order to assess the success of the company, a look at sales development can also make sense. A solid, steady and sustainable sales growth is positive.
Future development
The most important thing for investors is, of course, that the dividend will continue to be paid out in the future. Therefore, before buying a share, you should make research about the company and your business environment. An important source of information is, for example, the annual report, because shareholders are also informed about future risks.
A sustainable dividend policy also speaks if the company does not release its entire profit. The retained money can be invested in further growth or serve to release a stable dividend even in bad times. Under experts, a distribution rate between 40 and 60 percent is considered healthy.
Editor finance.net