Best Dividend Paying Stocks

Dividends on stocks are a good way to increase one's financial liquidity. Though we cannot always predict how much amount we would be earning through stock dividends, they are certainly one of the reasons for entering the stock markets. Before we know of the best dividend paying stocks in 2011 and beyond, we need to understand the important points on which stock dividends depend. Here are these points explained one after the other.

Dividend Paying Policy
Dividends are paid to shareholders of the company from the total profits generated during the year. So, naturally, the dividend given per share will be large if the profits are high. The board of directors finalizes the interim as well as final dividends for all the shareholders. As dividends are directly linked to the net profits, you should invest in firms having high net income. All companies cannot have high profitability as their business model might not be sustainable at all times of the economy. However, you need to select from sectors which are least affected by a slowdown, and have consistency in performance to gain handsome dividends. The good dividend paying stocks are mostly from the following sectors:

• Information technology
• Pharmaceuticals
• Consumer goods
• Banking and finance

Almost all major firms belonging to the above sectors are able to maintain high gross profit and high net profit ratios which makes them cash rich. So, they are able to reward their shareholders with attractive dividends. The high profits are also because of the consistent and ever-increasing demand for the products and services of these firms. So, you should ask yourself whether the company you have chosen has seen a rise in the demand for its products before buying stocks of that company.

However, it has been observed that many people are not aware of the best dividend paying stocks, and end up buying the wrong securities causing a financial loss. So, consulting experts from the finance and investments field would be advisable if you do not have a self study of the capital markets.

Dividends: What to Do
Here are some things which you should try to follow to ensure good dividends:

• Study company fundamentals before investing
• Look at the dividend paying history of the company
• Keep a close tab on announcements made by the company senior management regarding dividends
• Track the business activities of the company closely, and try to estimate its earnings. High earnings may lead to good dividends

Dividends: What Not to Do
Here are some tings which you should be careful about while buying stocks for dividends:

• Do not believe in market speculation that dividend announcement will soon be made by a particular company. Such news should be backed by statements by management and proof
• Avoid taking positions in a stock just for dividend purposes. Check the valuations as compared to the peers and also earnings of the company before taking the final decision

There are some stocks which have always featured in the list of best dividend paying stocks. It is expected that these would be the high dividend paying stocks also. So, go through the list of high dividend stocks given below.

High Dividend Stocks

Sector Wise High Dividend Paying Companies
Sector	Name of the Companies
Banking and Financial Services	JPMorgan Chase, Bank of America and Wells Fargo
Consumer Products	McDonald's, Johnson & Johnson, Coca-Cola and Procter & Gamble
Pharmaceuticals	Bristol-Myers Squibb, Pfizer Inc. and Merck & Co Inc.
Telecommunications	Verizon Communications, AT&T, Windstream and Frontier Communications
Steel and Engineering	POSCO, ArcelorMittal and Nippon Steel
Agriculture	Terra Nitrogen Company, CF Industries Holdings and Mosaic Company

So, this was all about the best dividend paying stocks. Systematic thinking and planning is required to reap the maximum benefit from stock investments. With a hope that you will try your best to improve your stock picking skills, I would like to sign off here. Good luck!

DISCLAIMER: This article is just for reference purposes and does not recommend any stock market transactions.