High dividend stocks
Like almost all investing question: it depends! Boring companies generally appreciate slowly and as you note, pay dividends. More speculative investing can get you some capital gains, but also are more likely to tank and have you lose your original investment. The longer your time horizon, and the more risk you are willing to take, then it is reasonable to tilt towards, but not exclusively invest in, more speculative stocks. A shorter horizon, or if you have trouble sleeping at night if you lose money, or are looking for an income stream, would then tend towards the boring side. Good Luck "Future tax increases on dividends are likely. The Wall Street Journal says. ""The millions of Americans who receive dividend income ... need to begin adjusting their investment strategy accordingly."" (ref) ""Last week the Senate Budget Committee   passed a fiscal 2011 budget resolution   that includes an increase in the top   tax rate on dividends to 39.6% from   the current 15%—a 164% increase."" ...   ""You can expect fewer businesses   either to offer or increase dividend   payouts.""" You might want to look up Dividend Yield Trap. Many stocks with high dividend yields got that way not because they decided to increase their dividend, but because their prices have dropped. Usually the company is not in good shape and will reduce their dividend, and you're stuck with a low-yield stock which has also decreased in price. I had read a book about finance, and it had mentioned that you can gain big profits from investing in the best companies in the most boring markets, like the funeral business for example. These markets are slow growing, but the companies pay a good dividend. Many books recommend investing in dividends because of the compound growth and stable income. Remember that at the end of the day, you should put the same amount of research into buying a stock as you would buying the entire company. With that being said, you may find a great company that may or may not offer dividends, but it should not be of great significance since you feel you are buying into a great company at a fair price. Though dividend growth is a great tool to use to see if a company is doing well.
"Dividends telegraph that management has a longer term focus than just the end of quarter share price.  There is a committment to at least maintain (if not periodically increase) the dividend payout year over year.  Management understands that cutting or pausing dividends will cause dividend investors in market to dump shares driving down the stock price.   Dividends can have preferential tax treatment in some jurisdictions, either for an individual compared to capital gains or compared to the corporation paying taxes themselves.  For example, REITs (real estate investment trusts) are a type of corporation that in order to not pay corporate income tax are required to pay out 95% of income as dividends each year.  These are not the only type, MLP (master limited partnerships) and other ""Partnership"" structures will always have high dividend rates by design. Dividends provide cash flow and trade market volatility for actual cash.  Not every investor needs cash flow, but for certain investors, it reduces the risks of a liquidity crisis, such as in retirement.  The alternative for an investor who seeks to use the sale of shares would be to maintain a sufficient cash reserve for typical market recessions." "The short answer is that it depends on the industry. In other words, margin alone - even in comparison to peers - will not be a sufficient index to track company success.  I'll mention Apple quickly as a special case that has managed to charge a premium margin for a mass-market product.  Few companies can achieve this. As with all investment analysis, you need to have a very clear understanding of the industry (i.e. what is ""normal"" for debt/equity/gearing/margin/cash-on-hand) as well as of the barriers-to-entry which competitors face. A higher-than-normal margin may swiftly be undermined by competitors (Apple aside).  Any company offering perpetual above-the-odds returns may just be a Ponzi scheme (Bernie Maddof, etc.).  More important than high-margins or high-profits over some short-term track is consistency of approach, an ability to whether adverse cyclical events, and deep investment in continuity (i.e. the entire company doesn't come to a grinding halt when a crucial staff-member retires)." I use the following method. For each stock I hold long term, I have an individual table which records dates, purchases, sales, returns of cash, dividends, and way at the bottom, current value of the holding. Since I am not taking the income, and reinvesting across the portfolio, and XIRR won't take that into account, I build an additional column where I 'gross up' the future value up to today() of that dividend by the portfolio average yield at the date the dividend is received. The grossing up formula is divi*(1+portfolio average return%)^((today-dividend date-suitable delay to reinvest)/365.25) This is equivalent to a complex XMIRR computation but much simpler, and produces very accurate views of return.  The 'weighted combined' XIRR calculated across all holdings then agrees very nearly with the overall portfolio XIRR. I have done this for very along time.  TR1933 Yes, 1933 is my year of birth and still re investing divis! Your cons say it all. I would not be buying stocks based soley on a high dividend yield. In fact companies with very high dividend yields tend to do poorer than companies investing at least part of their earnings back into the company. Make sure at least that the company's earnings is more than the dividend yield being offered. "Dividend yields can also reflect important information about the company's status. For example, a company that has never lowered or stopped paying dividends is a ""strong"" company because it has the cash/earnings power to maintain its dividend regardless of the market. Ideally, a company should pay dividends for at least 10 years for an investor to consider the company as a ""consistent payer."" Furthermore, when a company pays dividend, it generally means that it has more cash than it can profitably reinvest in the business, so companies that pay dividends tend to be older but more stable. An important exception is REIT's and their ilk - to avoid taxation, these types of funds must distribute 90% of their earnings to their shareholders, so they pay very high dividends. Just look at stocks like NLY or CMO to get an idea. The issue here, however, is two fold: So a high dividend can be great [if it has been paid consistently] or risky [if the company is new or has a short payment history], and dividends can also tell us about what the company's status is.  Lastly, taxation on dividend income is higher than taxation on capital gains, but by reinvesting dividends you can avoid this tax and lower your potential capital gain amount, thus limiting taxes.  http://www.tweedy.com/resources/library_docs/papers/highdiv_research.pdf is an excellent paper on dividend yields and investing." There are dividend newsletters that aggregate dividend information for interested investors.  Other than specialized publications, the best sources for info are, in my opinion: "In the case of mutual funds, Net Asset Value (NAV) is the price used to buy and sell shares. NAV is just the value of the underlying assets (which are in turn valued by their underlying holdings and future earnings). So if a fund hands out a billion dollars, it stands to reason their NAV*shares (market cap?) is a billion dollars less. Shareholder's net worth is equal in either scenario, but after the dividend is paid they are more liquid. For people who need investment income to live on, dividends are a cheap way to hold stocks and get regular payments, versus having to sell part of your portfolio every month.  But for people who want to hold their investment in the market for a long long time, dividends only increase the rate at which you have to buy. For mutual funds this isn't a problem: you buy the funds and tell them to reinvest for free. So because of that, it's a prohibited practice to ""sell"" dividends to clients." There can be the question of what objective do you have for buying the stock. If you want an income stream, then high yield stocks may be a way to get dividends without having additional transactions to sell shares while others may want capital appreciation and are willing to go without dividends to get this. You do realize that both Pfizer and GlaxoSmithKline are companies that the total stock value is over $100 billion yes? Thus, neither is what I'd see as a growth stock as these are giant companies that would require rather large sales to drive earnings growth though it may be interesting to see what kind of growth is expected for these companies. In looking at current dividends, one is paying 3% and the other 5% so I'm not sure either would be what I'd see as high yield. REITs would be more likely to have high dividends given their structure if you want something to research a bit more. "Yes, they are, and you've experienced why. Generally speaking, stocks that pay dividends will be better investments than stocks that don't.  Here's why: 1) They're actually making money. They can finagle balance sheets and news releases, but cash is cash, it tells no lies. They can't fake it.   2) There's less good they can do with that money than they say. When a business you own is making money, they can do two things with it: reinvest it into the company, or hand it over to you. All companies must reinvest to some degree, but only a few companies worth owning can find profitable ways of reinvesting all of it. Having to hand you, the owner, some of the earnings helps keep that money from leaking away on such ""necessities"" like corporate jets, expensive printer paper, or ill-conceived corporate buyouts.      3) It helps you not freak out. Markets go up, and markets go down. If you own a good company that's giving you a nice check every three months, it's a lot easier to not panic sell in a downturn. After all, they're handing you a nice check every three months, and checks are cash, and cash tells no lies. You know they're still a good company, and you can ride it out.    4) It helps others not freak out. See #3. That applies to everyone. That, in turn means market downturns weigh less heavily on companies paying solid dividends than on those that do not.  5) It gives you some of the reward of investing in good companies, without having to sell those companies. If you've got a piece of a good, solid, profitable, growing company, why on earth would you want to sell it?  But you'd like to see some rewards from making that wise investment, wouldn't you?     6) Dividends can grow. Solid, growing companies produce more and more earnings. Which means they can hand you more and more cash via the dividend. Which means that if, say, they reliably raise dividends 10%/year, that measly 3% dividend turns into a 6% dividend seven years later (on your initial investment). At year 14, it's 12%. Year 21, 24%. See where this is going? Companies like that do exist, google ""Dividend Aristocrats"".  7) Dividends make growth less important. If you owned a company that paid you a 10% dividend every year, but never grew an inch, would you care? How about 5%, and it grows only slowly?  You invest in companies, not dividends. You invest in companies to make money. Dividends are a useful tool when you invest -- to gauge company value, to smooth your ride, and to give you some of the profit of the business you own. They are, however, only part of the total return from investing -- as you found out." The highest growth for an investment has historically been in stocks. Investing in mature companies that offer dividends is great for you since it is compound growth. Many oil and gas companies provide dividends. You are comparing apples and oranges: the charts show the capital appreciation excluding dividends. If you include dividends and calculate a total return over that period you see VSMAX up 132% vs. FSEVX up 129%, i.e. quite close. That residual difference is possibly due to a performance difference between the two benchmarks. Investopedia has a good definition. Stock dividends are similar to cash dividends; however, instead of cash, a company pays out stock. Stock splits occur when a company perceives that its stock price may be too high. Stock splits are usually done to increase the liquidity of the stock (more shares outstanding) and to make it more affordable for investors to buy regular lots (a regular lot = 100 shares). If you don't have a good knowledge of finance, maybe you should not put too much money in individual stocks. But if you really want to invest, you can just compare the rate of return of the most known stocks available to you (like the one from the S&P for the US). The rate of return is very simple to compute, it's 100*dividend/share price. For example a company with a current share price of 50.12 USD that delivered a dividend of 1.26 USD last year would have a rate of return of 100 * 1.26/50.12= 2.51% Now if you only invest in the most known stocks, since they are already covered by nearly all financial institutions and analysts: If you are looking for lower risk dividend companies, take a sample of companies and invest those with the lowest rates of return (but avoid extreme values). Of course since the stock prices are changing all the time, you have to compare them with a price taken at the same time (like the closing price of a specific day) and for the dividend, they can be on several basis (yearly, quartely, etc..) so you have to be sure to take the same basis. You can also find the P/E ratio which is the opposite indicator (= share price/dividend) so an higher P/E ratio means a lower risk. Most of the time you can find the P/E ratio or the rate of return already computed on specialized website or brokers. "This has been answered countless times before: One example you may want to look at is DGRO.  It is an iShares ETF that many discount brokers trade for free.  This ETF:  offers ""exposure to U.S. stocks focused on dividend growth""." IBM is famous for spending lots of money on stock buyback to keep the stock price higher. The technique works, and investors in growth stocks generally prefer a high market prices to a taxable dividend payment. Dividends are ways to return shareholder value when a company generates a lot of cash, but doesn't have alot of growth. Electric and gas companies are a classic example of high-dividend companies.