Dividend stocks are companies that distribute a certain amount of their earnings to their stockholders regularly. As you might have deduced already, it represents an excellent opportunity for any investor to receive a fixed and predictable income just for the fact of being the owner of a stock that fits this description.

However, it is essential to understand that not all dividend stocks necessarily represent a significant investment overall.

There are just way too many market forces at play every day that might influence your company and your potential profit, regardless of the business’s current performance. Even the most solid dividend stock can be affected by the day-to-day workings of the stock market.

It is precisely for that reason that, when looking to invest in dividend stocks, you should be expecting your profits to be long-term based instead of short-term based.

However, there is still the matter of finding and choosing a trustable dividend stock for you.

Finding your ideal dividend stock

When searching for a dividend stock to invest in, your focus should be aimed at finding a company that reflects the following criteria the most:

  • It is a company with stable income streams.
  • It has vital dividend track records.
  • It is capable of taking care of itself in the long-run.
  • It is an excellent company overall.

As long as your company is faithful to those key points, you can be sure that your investment is a good one.

To better evaluate how a specific company is currently managing up regarding those criteria, you can start by researching the following data:

  • Its payout ratio. How much of a percentage of its earnings are going to stockholders.
  • Its history of raises. Is the company capable of raising the value of its dividends over time? 
  • Whether it has a steady revenue, you should look for a stable company to stabilize your earning. Any sign of erratic income should be a red flag.
  • Does it have a competitive advantage? 
  • And, finally, does your company have a high yield?

Dividend stocks to invest in

A great point of reference is the Dividend Aristocrats Index. Managed by the S&P Indices, it is a collection of several companies that have had increments in dividends over the past 25 years consecutively. If you’re looking to play it safe, any company included in this list has proven over time that they’re capable of taking care of themselves and their shareholders even at the lowest points of the market in recent years.

Some companies included on the list are: 

  1. Procter & Gamble
  2. Coca-Cola
  3. Realty Income
  4. Johnson & Johnson
  5. Target

However, keep in mind that just because a company isn’t on the Dividend Aristocrat Index, it doesn’t necessarily mean that it isn’t a trustworthy and deliverable choice. Some options deliver what you should be looking for but haven’t been frequent enough to be recognized by the index. To exemplify, here are some other options that might also be of help to you:

  1. Verizon
  2. Microsoft
  3. Apple
  4. Welltower

Remember that dividend stocks are long-term investments!

A common mistake for investors is to forget that dividend stocks are long-term investments. 

As long as you keep that in mind and know what you should be looking for, your long-term profit will undoubtedly be able to overcome any potential day-to-day price movements in your dividends.