I am seeing percentage over 5%, 10% even. I know there are taxes and stuff but the numbers seem more appealing than things like online savings account (~2% annual). And you could compound at each payout. Is this a much "safer" option than non-dividend stocks? Pls explain.

marked as duplicate by Nathan L, D Stanley, Rupert Morrish, MD-Tech, JoeTaxpayer investing Apr 6 at 1:18

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  • You should be aware that a dividend is Yield not Total Return so unless the security appreciates in price, you are paying for the privilege of receiving your own money from your brokerage account. You should be investing in high quality companies that are leaders in their sector with strong (and growing) free cash flow, low debt, and good management. If they pay a dividend, fine. If not, no big deal. – Bob Baerker Apr 2 at 13:48
  • You have to pay taxes on dividends, when the company decides to issue them. That sucks. In contrast a company which retains its growth as capital gains gives you the option to cash those in at a time of your choosing. – Ben Voigt Apr 3 at 4:31
  • @BenVoigt: unless Warren gets elected -- or the company is acquired for cash or part-cash, as ESRX->CI just did to me Dec. 20 last year. I didn't see it post until after Xmas, so I had only 2.5 market days to compensate. Also if US taxpayer (not stated in Q) in the 22% bracket -- i.e. your taxable income (after deductions) is under about $39k single or $77k joint (currently) -- both 'qualified' dividends (from US companies held at least a month) and long-term realized gains (held over a year) have zero tax. – dave_thompson_085 Apr 3 at 15:20

Most stocks at 10% dividend or more are either in trouble or else they finance regular business operation with short-term debt that continuously rolls-over. In the second case a rise in short-term interest rates decreases margins.

Most stocks at 5% dividend or so, have significant long-term debt and even pension obligations. These companies are often routinely profitable but fundamentals can improve even more down around 3% dividends. For instance the higher dividend could be due to a declining stock price.

In any case look at the debt-to-equity ratio, the P/E ratio, and the dividend all together. Of course consider the business model.

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