One of the things that I always tend to look for in a company that I’m thinking about investing in is if they regularly pay dividends to their shareholders or not. The idea being that if a company is paying out dividends you can assume that they are in good shape financially and might be worth further investigation. You may even decide that they are shares to buy.  Yes I know some companies reinvest the dividends so this can be misleading. It may look like some companies aren’t paying when really they’re just giving it back to themeselves to fund future growth. Still, it’s a great place to start when you’re looking for shares to buy. For this year there were 366 companies who paid out dividences from the Standard & Poor-500 stock index so thats quite a few picks you have right away. That’s also 134 less companies you have to worry about when you’re narrowing down your investments.

From the 366 companies who are paying a dividence 72 of them are paying a higher percentage than last year. What does this mean? Well, profits must be up as they can afford to pay out even more to the investor. This is another good indicator of a good company. If the dividence pay out has gradually increased over a period of say 5 years you could be on to a winner. If you want to put a figure on this then look for dividends growing at a rate of 5% each year. This is just a start you of course have to look at the cash flows in and out of the business and get your head buried in those annual reports. One thing you do have to check is the dividends aren’t being paid out at a rate which is causing debt. That’s hardly a great sign.

McDonald’s is one company who have a great record of paying out dividends to its shareholders. Then we are talking about one of the global brands here with billions of dollars in profit each year. Walmart is another which is always worth a look. For some companies such as in the tech industry it might no tbe possible to see the figures for 5 years. These types of company have been notorious for not paying out dividends so have a look at say a period of three years to see if they have started doing this.

Finding companies which regularly pay out dividends can be a great place to start when identifying stocks to buy. Use one of the many stock screeners you can find online to filter out companies who don’t pay dividends and then work out the best investment options from there. From there you can try to find undervalued stocks and keep filtering out companies until you have a few winners.