How To Identify And Pick Dividend Stocks For Growth?

How to identify dividend-paying stocks?

Making investments into dividend-paying stocks is extremely important for the purpose of growth, as dividend stocks allow earnings for the investors, apart from the capital gains that can be made due to the increase in the share price. Warren Buffett, one of the most renowned investors and the head of Berkshire Hathaway, is known for putting his money into first-rate dividend-paying organisations. This has helped him compound his wealth over a longer period of time. He also supports the thought that reinvesting dividends is a rewarding strategy in contributing, particularly since dividends can give investors protection from inflation, while most other assets would not.

To pick a good dividend-paying stock, that can contribute to one’s growth, some of the factors which need to ponder upon are:

• Strong Cash Balances – Traditionally, firms with high cash balances on their books, or with surplus cash and with no plans for immediate expansion in the future, or in the mature phase of their business cycles, are expected to pay high dividends to their shareholders. This is also an indicator of consistently good earning seasons, which is an important factor for the management of companies while deciding on proposing dividends.
• Less Debt – Dividends are good, but it is also important to avoid dividend-paying organisations with high debt. And hence, to determine an organisation's debt situation, investors should look at its debt-to-equity ratio. If by chance, the debt to equity ratio is high, investors should look somewhere else. Every investor has a different view when it comes to looking at the debt to equity ratio, but any company with a debt-to-equity ratio above than 2.00 should be excluded. In an ideal scenario, you need to see a debt to equity ratio less than 1.00, which could allow investors to grow their wealth.
• Industry scenario – While picking dividend-paying stocks, it is also important to look at the prevailing industry condition, and where the industry will be heading in the future. If the industry is in a growth phase, it is expected that the firms might not pay a large amount of dividend, while if the industry is in a mature cycle, high-value dividends could be expected. Regulations in the industry and the government’s trade policies around the industry can also have an impact on the dividend-paying abilities of the companies.

Other factors that need to be seen while looking for dividend pay-outs

High Dividend yield – The dividend yield of a stock is the total dividend per share paid by the company divided by the market price of the stock. In other words, it can also be said as the total dividend paid out by the company divided by the total market value of all its outstanding shares.

An exceptionally good business performance – It may so happen that during a period, the business has performed exceptionally well and generated a significant amount of cash. In such circumstances, the management may declare a dividend which is a break from the quantum of earlier years’ dividend declaration.

Other Reasons – The stock market volatility could be another reason for a high dividend yield earned by the shareholders of a company. Temporary factors such as an adverse macroeconomic event or an adverse political event or an event specific to the company that has got no relation to the business performance of the company, like for example the sudden death of its CEO or arrest of one of its directors or matters which does not relate to the functioning of the company, may pull down the share prices of the company in the stock market.

IMB Stock Price Performance

As on 27^th January 2020, at 12:00 P.M (Greenwich Mean Time), by the time of writing this report, the Imperial Brands Plc Stock was trading at a price of GBX 1914.40 per share on the London Stock Exchange market, a drop in the value of 2.28 per cent or GBX 44.60 per share, as opposed to the price of the stock on the previous trading day, which had been reported to be at GBX 1959.00 per share.

The market capitalisation (M-Cap) of the stock stood at a value of GBP 18.54 billion, with respect to the current market price of the stock of the company. The annual dividend of the stock has been reported to be at GBX 206.57 per share, while the annual dividend yield of the company was reported to be at 10.54 per cent.

It has been reported that the Imperial Brands Plc stock had lost around 18.93 per cent in value, in the last twelve months, since January 28, 2019, when the stock was trading at a price of GBX 2361.50 per share at the time of the close of the market.

The beta of the Imperial Brands Plc’s stock has been reported to be at 1.02, giving an idea that the movement in the stock price, is more volatile, as against the movement of the comparative benchmark index.

BT.A Stock Price Performance

As on 27^th January 2020, at 12:05 P.M (Greenwich Mean Time), by the time of writing this report, the BT Group Plc Stock was trading at a price of GBX 169.24 per share on the London Stock Exchange market, a drop in the value of 1.03 per cent or GBX 1.76 per share, as opposed to the price of the stock on the previous trading day, which had been reported to be at GBX 171.00 per share.

The market capitalisation (M-Cap) of the stock stood at a value of GBP 16.90 billion, with respect to the current market price of the stock of the company. The annual dividend of the stock has been reported to be at GBX 15.40 per share, while the annual dividend yield of the company was reported to be at 9.01 per cent.

It has been reported that the BT Group Plc stock had gained around 28.29 per cent in value, in the last twelve months, since January 28, 2019, when the stock was trading at a price of GBX 236.00 per share at the time of the close of the market.

The beta of the BT Group Plc’s stock has been reported to be at 0.78, giving an idea that the movement in the stock price, is less fickle, as against the movement of the comparative benchmark index.

SSE Stock Price Performance

As on 27^th January 2020, at 12:10 P.M (Greenwich Mean Time), by the time of writing this report, the SSE Plc Stock was trading at a price of GBX 1500.50 per share on the London Stock Exchange market, a drop in the value of 1.90 per cent or GBX 29.00 per share, as opposed to the price of the stock on the previous trading day, which had been reported to be at GBX 1529.50 per share.

The market capitalisation (M-Cap) of the stock stood at a value of GBP 15.814 billion, with respect to the current market price of the stock of the company. The annual dividend of the stock has been reported to be at GBX 92.20 per share, while the annual dividend yield of the company was reported to be at 6.03 per cent.

It has been reported that the SSE Plc stock had lost around 33.02 per cent in value, in the last twelve months, since January 28, 2019, when the stock was trading at a price of GBX 1128.00 per share at the time of the close of the market.

The beta of the SSE Plc’s stock has been reported to be at 0.69, giving an idea that the movement in the stock price, is less fickle, as against the movement of the comparative benchmark index.

HSBA Stock Price Performance

As on 27^th January 2020, at 12:15 P.M (Greenwich Mean Time), by the time of writing this report, the HSBC Holdings Plc Stock was trading at a price of GBX 561.00 per share on the London Stock Exchange market, a drop in the value of 3.18 per cent or GBX 18.40 per share, as opposed to the price of the stock on the previous trading day, which had been reported to be at GBX 579.40 per share.

The market capitalisation (M-Cap) of the stock stood at a value of GBP 117.694 billion, with respect to the current market price of the stock of the company. The annual dividend of the stock has been reported to be at GBX 39.60 per share, while the annual dividend yield of the company was reported to be at 6.83 per cent.

It has been reported that the HSBC Holdings Plc stock had lost around 11.11 per cent in value, in the last twelve months, since January 28, 2019, when the stock was trading at a price of GBX 561.00 per share at the time of the close of the market.

The beta of the HSBC Holdings Plc’s stock has been reported to be at 1.06, giving an idea that the movement in the stock price, is more volatile, as against the movement of the comparative benchmark index.