How to Select High Paying Dividend Stocks

Investing in dividend stocks is a little different than just going for the old 'buy low, sell high' mentality. You want to pay attention to a few other aspects of the company you plan to invest in. In this guide I will give some tips on how to approach this kind of investing.

Understand what dividends are and how they work - When a company earns a profit, it has essentially two options of what to do with that extra money. They can either reinvest it (by hiring more people, upgrading machinery/software, paying out higher bonuses etc), or it can distribute this profit to their shareholders in the form of dividends. It begs the question - just why would a company wish to pay dividends then? The simple answer is that a company that consistently pays dividends shows that it is a financially healthy, profitable company, which in turn will attracting more investors and spur growth.

Understand the benefits of dividend investing - The obvious advantage is that you can expect a consistent source of returns every quarter, similar to earning interest on your savings account (but often at a much better rate!). Because dividend-paying companies tend to be larger and more financially stable, their stock will also tend to be less volatile, meaning the stock price will probably not move very drastically. You are not likely to lose too much capital value (i.e. buy high sell low), but at the same time you shouldn't expect too much in terms of capital gains (you probably won't sell too much higher than you bought).

Understand the risks of investing for dividends - It is completely up to the company whether or not they will pay dividends in any given quarter, so your expected payout might disappear at any time. It is not common for companies to just stop paying out dividends for no apparent reason, but if the payments are 'one-offs' from leftover budget from a given project, or if there are significant changes in the market (example: the mortgage crisis!), dividends can be reduced or cut altogether. And obviously, you are still holding stocks, so you are exposed to price fluctuations and will still want to pay attention to the other risks of owning stocks.

Picking the stock - Given the profile of companies that pay dividends, the best picks will most often be large caps. Here, the same principles than investing in stocks for capital gains apply - study the industry to get a sense of whether things are looking up and times are good, study competitors, and study the company itself (I suggest checking out my other article "How to Pick Stocks" for tips). In short, you will want to feel confident that external factors won't hinder profitability of the company in the long term (example: higher gas prices, lower dollar affecting costs), that your company of choice isn't being driven out of the market by competitors (example: toshiba HD DVD), and that it is being well run and that you have a positive impression overall of the service it provides.

Research the dividend payment history itself - You can find this information in any financial reporting website. How long has the company been paying dividends? Has it been growing consistently? What is the payment per-share comapred to its direct competitors? Has it ever reduced/cut dividends? If so why? Have earnings been growing at a similar pace as dividends? Once you can answer these questions, and feel satisified with the comapny's outlook, you can be confident your dividend-paying stock will make you some nice returns every quarter.

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How to Select an Investment Adviser or Financial Planner

Know What You're Buying

Some financial planners and investment advisers offer a complete financial plan, assessing every aspect of your financial life and developing a detailed strategy for meeting your financial goals. They may charge you a fee for the plan, a percentage of your assets that they manage, or receive commissions from the companies whose products you buy, or a combination of these. You should know exactly what services you are getting and how much they will cost.

Check Their Form ADV

People or firms that get paid to give advice about investing in securities generally must register with either the US Securities and Exchange Commission (SEC) or in their state where they have their principal place of business.

To find out about advisers and whether they are properly registered, you can read their registration forms, called the "Form ADV." The Form ADV has two parts. Part 1 has information about the adviser's business and whether they've had problems with regulators or clients. Part 2 outlines the adviser's services, fees, and strategies. Before you hire an investment adviser, ***always ask*** for and carefully read both parts of the ADV. You can view an adviser's most recent Form ADV online by visiting the Investment Adviser Public Disclosure (IAPD) website (see Resource links, below).

Caveat Emptor

Remember, there is no such thing as a free lunch. Professional financial advisers do not perform their services as an act of charity. If they are working for you, they are getting paid for their efforts. Some of their fees are easier to see immediately than are others. But, in all cases, you should always feel free to ask questions about how and how much your adviser is being paid. And if the fee is quoted to you as a percentage, make sure that you understand what that translates to in dollars.

Speak Up

Ask as many questions as you need to in order to be comfortable with the person and the process they are suggesting. Ten key questions to consider are listed at the Board of Standards for financial planners (see Resource links, directly below).

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How to Research Stocks

This article attempts to provide a few good ideas of how to effectively research stocks.

In order to know which stock you want to buy, you must first decide how much time you have to spend doing research. There are some very important things to consider. Earnings. Does the company consistently beat earnings estimates? How is their outlook for the current quarter and year? On Yahoo Finance, after you type in the symbol for a stock, on the left there are many options helpful for research. One is "Analyst Estimates". This will show what the experts that cover the company think the company will earn during the current quarter and current year. One thing that I like to look for is if the estimates are being raised, which means that the experts covering the company think they will earn more than they previously thought. Another popular factor in determining whether or not to buy a stock is the PE ratio (Price to Earnings ratio). The way to find this number is to divide the price of the stock by the amount it earns per share (ex.: Microsoft's stock is at $28.28 and its earnings per share for the year is $1.76 per share. The first divided by the second gives a PE ratio of 16). Some people say that a ratio of 20 or lower is ideal; others have different opinions.

The strategy I use, as well as others, is slightly different. To me, it makes sense to buy a company for how you think it's going to do in the future, considering both the company's earnings and it's plans to grow. There is a ratio called a Forward PEG ratio that gives a good barometer of this. It takes the current price of the stock, divided by how much it plans on earning per share next year, divided by how much it plans on growing next year. For Microsoft this number is about 1.04. If the number were near 2, I would probably not consider buying it. But if it is less than 1.5, I will definitely look into it. To me this makes sense, especially if you plan on holding the stock for more than just a few months, because it gives you a good idea of where the stock might be headed.

Another essential part in researching is to read the news stories about the stock you want to buy. I would read every news story about each stock you're considering every day. This is very important because it will give you all the necessary current news that all the big time traders have access to, and it will help you make a better informed decision about the stock. The annual and quarterly reports are also extremely beneficial if you have time to read them. These are submitted by the companies themselves, explaining their current performance and what they plan on doing in the future, whether it be introducing a new product or service, or perhaps acquiring another company. Again, all these things are available through Yahoo Finance and other free services.

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How to read profiles of companies to invest in

First get a brokerage account through companies such as TDAMERITRADE,SHAREBUILDER, OR SCOTTRADE just to name a few

Go on line into the research tools and pull up any company you like

Click on the profile tab and scroll down to their management page

On the page is all the numbers such as profit management,and a whole slew of info.Here is just 10 things that will give you a lot of info:

1 BETA this should be a low number
2 MARKET CAP this should be high millions to billions
3 OUTSTANDING SHARES usually high
4 DIVIDENDS good companies pay them and even increase them
5 TOTAL DEBT shold be very low
6 EARNINGS shold be high
7 CASH FLOW also should be positive and high
8 RETURN ON EQUITY should be very high
9 RETURN ON ASSETS,INVESTMENTS AND GROSS MARGIN should be high
10 PROFIT MARGIN should also be high

All of this info can be obtained through a prospectus if you call a company or go on their web site. You can even view files on the sec website to check on management and if they own stock with their own money( this is a very good sign usually unless inside trading is going on)

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How to possibly make more money than in the stock market

In todays market, it is hard to make money for your investments.

First you should decide if your current plan will be ok in time (once market straightens itself out)

If you decide to change or add to your investment portfolio, one option to consider is lending money to others.

In a way, you become a "bank" loaning money with interest.

One such site to view is http://www.prosper.com/join/pathfinderonline
You will need to bid on the loan and win the bid. In addition there are fees given back to the site.

In todays market, it is worthwhile to check out all options.

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How to NOT Buy and Hold Stocks

"Buy-and-Hold" is a passive investment strategy in which an investor buys stocks and holds them for long periods of time, regardless of movements in the market. An investor who uses a "buy-and-hold" strategy selects stocks, and once they are purchased, is not worried about short-term price movements or technical indicators.

Conventional investing wisdom tells us that with a long time horizon, stocks generate a higher return than other assets like bonds. But there is debate over whether a buy-and-hold strategy is actually better than an active investing strategy. Both sides have valid arguments. A buy-and-hold strategy has tax benefits, because long-term investments tend to be taxed at a lower rate than short-term investments. But now let's look at how a more active investing strategy would render greater returns.

Look at the picture for this article. The graph represents the performance of Apple's stock from July of 2005 to the end of 2006. The stock goes from $40 in July of '05 to $87 in February of '06. Then it goes back down by July of '06 and back up to $90 in December. If you were a buy-and-hold investor and bought Apple stock at $40 in July of 2005 and sold it at $90 in December of 2006, you would have made a great profit - more than doubling your money.

Now let's examine what a more active investor might have done (obviously hindsight is 20/20). Ideally, you would have bought the stock at $40. At that point, you must be constantly researching the stock, following its fluctuations, and looking for an opportunity to sell the stock to take some profit. If you were doing this, you might have been able to sell the stock at let's say $80.

Continuing to follow your stock, you would have had the opportunity to buy Apple stock back at around $50, and sold it after it went back up past $85 to $90. This strategy of active investing obviously has the potential to generate much greater returns than the typical buy-and-hold style.

* I will not attempt to teach in this article how exactly to know when to buy and when to sell a stock (I have written other articles titled "How to Know When to Buy a Stock" and "How to Know When to Sell a Stock"). But through reading books and practicing yourself, you will be able to create your own investments strategy that best suits your personality and needs.

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How to make a million dollars

Just having a million dollars in the bank doesn't make you a millionaire if you owe a million dollars. You need to make your NET WORTH add up to a million dollars. You can calculate your net worth by subtracting your assets from your liabilities. This is what you need to work on. Limiting your debt while increasing your salary will help you become a millionaire.

In order to become (and stay) a millionaire you are going to need to live a frugal lifestyle. This means living at or below your means. Also many millionaire weren't always at the top. They had to work to get there. Many millionaires are self-employed and self-motivators.

You need to plan and research your investments. Careful planing and a long term approach will get you on your way to financial freedom.

If you save and invest money every month, you will become a millionaire at some point. All you need to do is let the power of compounding(-- earning interest upon the interest) work for you. The more you save and the more you invest, the more compounding will work for you.

You need to know your current net worth. Once you calculate your current net worth, set up long term financial goals. Figure out when you would like to make a million dollars and how much you will need to save each month to achieve your goals.

Once you figure out your goals and how much you need to save each month, you now need to determine how you intend to make this money. Maybe you can start your own business or maybe you can work for someone else. Whatever you choose, make sure you stick to your financial goals.

One of your first priorities is to set up an emergency fund. This is usually a few months worth of your income.

The best way to manage your financial goals is to set up a budget, pay off ALL debt, start saving as early as possible and take advantage of your companies 401(k) plan.

With careful planing, a long term approach and no debt you can become a millionaire in no time!

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How to Know When to Sell a Stock

Sell the stock before it goes down. That's easier said than done. The trick is to know when it is going to go down, and sell before then. Buying stocks is a trade, selling them is an art. Anyone can buy a stock and make some money, but only those who master the art of selling stocks will get rich.

Do your research constantly. This way you will almost never be blindsided by something unknown that will cause your stock to go down. Doing your research should alert you about what's to come. Read all the news stories about the company.

Have a reason for buying the stock. Maybe you bought it because it has a new product coming out. Maybe you bought it because you feel another company will take it over. Maybe you bought it because you think it can capitalize on something that's happening in the economy. These scenarios are catalysts that can propel the stock higher. Once the catalyst has happened, or once the reason you bought the stock has taken place, you should consider selling it then.

Set a price target for the stock. Maybe you buy the stock at $60 and your goal is for it to reach $90, and you have done the research and believe there is a catalyst that will take the stock to $90. So once it reaches $90, sell it! You did great! Lock in those gains by selling it.

Another strategy is to sell the stock on the way up. I believe that this is extremely important. If you buy 100 shares of a stock at $60 and your price target is $90, sell incrementally on the way up. You might sell 20 shares at $66, 20 more at $72, another 20 at $78, 20 at $84, and the last 20 shares at $90. Selling a stock on its way up gives you more of a guarantee that you won't lose money on it if it plummets all of the sudden.

There are a few more quick reasons that you might want to sell a stock:

Sell it if it keeps going up for a reason unknown to yourself. Chances are its hype that's sending this stock up.

Sell it if it goes down after your catalyst has occurred.

Sell it if you can't handle the stress associated with the stock's movement.

Sell it if you want to buy yourself some new shoes!

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How to Know How Much Money to Invest in the Stock Market

As I stated in the introduction, it is never too early to start investing. But if you start out small, you need to choose wisely where you put your money. Also, chances are that if you are starting out small, then you probably don't have a lot of time to dedicate to following the stocks you might want to invest in. This is another important point that should be taken into consideration.

First off you need to decide how much time you'll have to dedicate to researching your investments. If you think you will have a couple hours each week to follow your investments, then I would recommend investing in stocks. But as you get older, you should decrease your exposure to stocks. Anyone under 30 years of age can afford to have 100% of their investments in stocks. After that, you should decrease it as your age increases. The general consensus is that for every five years you age (after 30), decrease your exposure to stocks by 10%, and put that money into a safer investment like bonds or CDs. Example: Age 45 = 70% stocks, 30% fixed income (safer investments).

Now, if you will not have a couple hours each week to research and follow your stocks, then I would recommend investing in a mutual fund. This way you will able to be diversified and achieve a decent rate of return on your investment.

Lastly, you must decide exactly how much money you want to use to invest. Basically, anything is good. If you are investing in stocks on your own, I would say that $2,500 is a good start. That way you could have $500 in five different stocks and be diversified. But even $500 to begin with is okay. However, if you are investing in a mutual fund, you have more flexibility. There are mutual funds that allow you to put in as little as $50 at any time without charging a fee. Usually you have to deposit an initial payment of somewhere between one and five thousand dollars. The nice thing about investing in a mutual fund is that after you choose the one you want, it takes no further effort. All you have to do is just continue to put money in the fund, which can be the most difficult part.

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How to Invest in Wind Stocks

Investing in wind stocks is pretty simple. The key is not only finding a good wind company to invest in, but finding a good opportunity to buy the stock. Wind stocks are extremely volatile. It seems as if they all go up or all go down at the same time, and for weeks at a time at that.

The key is to do your research, and to look for a good entry point to buy the stock you desire. And once you have it, be looking for a good chance to sell the stock as well. Like I said, they are very volatile stocks. If you buy a wind stock and generate a decent return, I would look to sell it as soon as you get an opportunity.

Here are the ticker symbols of some wind stocks I like. But please research them before you decide to buy them. I will list the stocks in order of how much I like them (I own the first two):

BWEN
FSYS
OC
KDN
OTTR
WGOV
TNB

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