In my previous post, the blogger from Createwealth8888, highlighted that I should look at dividend yield and dividend payout ratio as a pair, and not that many investment bloggers mentioned it. And rightly so. High dividend yield is desirable to shareholders. However, low payout ratios can be good too. Low payouts can mean the company is growing rapidly and has the potential for high total returns. Well, I always have a suspicion on stocks with high dividend yield and on their ability to maintain such high yield (looks too good to be true at times).

For income-oriented investors, the dividend payout ratio is a closely-watched financial measure. Dividend payout ratios provide valuable insight into a company’s dividend policy and can also reveal whether those payments appear “safe” or are in jeopardy of possibly being reduced. An excessively high payout ratio suggests that the company might be paying out more than it can comfortably ...

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