These high-yield dividend stocks have enough earnings to cover the dividends and make these stocks secure. The companies have what is known as a low payout ratio — the comparison between the cost of dividends and the company’s earnings.
It’s important to pay attention to the payout ratios of dividend stocks before investing. Many times, the only reason the stock has a high yield is that most or all of the company’s earnings are being paid out in dividend. The market knows this and drives down the price (thereby increasing the yield on the stock) because it suspects the company may have to cut its dividend.
But that is not the case with the stocks in today’s gallery, since the payout ratios are low even while the yield is high. This implies that the market is simply mispricing the underlying value of the company. That makes them good investment opportunities.
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