Posted on January 19, 2009 - by Drizzt

Dividend Aristocrats: There are still good dividend plays out there

Photo by Refracted Moments™

One of the differences between my dividend screens and others is perhaps looking at yield at the end of everything. This economic downturn have hit home the point that investing in dividend companies are not that safe and out-performing as I imagine.

The Dividend Aristocrats is abit different. They are the stocks that managed to raised their dividends for 20 years or more. Expanding dividend payments isn’t the end of story. My initial thoughts is: Having a stock that is low growth but high-yield is equivalent to one that is low yield and reasonable growth.

I think that opinion is flawed now. This recession hammers home the point that whatever it is, the ultimate determinating factor is more than yield and growth. Its business sustainability and cashflow generation. dividend aristocrats are much better in that sense because they obviusly have some moat in their model to enable them to raise dividend for 20 years.

In contrast, high yield plays traditionally have reached the apex of their cashflow generation capability. this is to say that future growth is limited. The danger of it is that the most likely way to go is down and probability of upside is limited.

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Related posts:

1. Do Dividend Plays Pay:Of Course they do [ETIKA][AZTECH][Thai Bev]
2. Stock Valuation and Dividend Sensitivity Analysis:How does price and dividend affect each other?
3. High Dividend Yield Stocks? – Part 8