Dividend stocks are companies that pay out regular dividends. Dividend stocks are usually well-established companies with a track record of distributing earnings back to shareholders.

Things to look out for

Mid-to-large Cap Stocks

• Mature companies with stable revenue, profits and cash flow (e.g google, amazon)
• mature companies are often not expanding aggressively, most of their earnings can be returned to shareholders as dividends.
• smaller, high-growth companies need more cash and resources to grow and expand their businesses, leaving less cash to pay shareholders dividends.

Dividend payout ratio is 30-50%

• Dividend payout ratio is the percentage of a company’s earnings paid to investors as cash dividends.
• It is an indication of the sustainability of a company’s dividend payment stream. investors would want a high payout ratio around 30-50%.
• However, a payout ratio that is too high ( around 80%)  is not desirable as the company is vulnerable to cutting dividends in the event of earnings decline

Track record of consistent dividends

• Look out for Consistent/growing dividends to shareholders
• Check to see that the company is paying a consistently-growing dividend over the last 5 to 10 years

The company's fundamentals are sustainable

• A company with deteriorating fundamentals (e.g. falling revenue, profits, cash flow, fading economic moat, etc.) cannot sustain its dividend payout in the long term.
• The less revenue and profit it makes, the less dividends it can pay. Always make sure the dividend company you want to invest in will remain fundamentally strong and robust for many years to come

The company has low capex

• invest in a company with low capital expenditure (CAPEX) commitments and plans
• A company with high CAPEX is continually reinvesting its profits to expand its business, which leaves less to distribute as dividends.l
• look for a company that’s able to maintain/grow its business with minimal CAPEX requirements.