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How To Avoid Dividend Traps

Oct. 28, 2015 4:51 PM ETGM, VZ, WMT, WFC1 Comment
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David Trainer's Blog
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Dividends offer great benefits such as income generation and a greater return on your investment when the stock price appreciates during your holding period.

Some of our recent Long Ideas provide investors an excellent dividend yield and, most importantly, these companies have the cash flows needed to sustain the dividend.

Quality Stocks With Quality Dividends

Sources: New Constructs, LLC

Unfortunately, the correlation between dividends and cash flows does not always hold true. What happens when a high dividend-yielding stock, which seems attractive to dividend-seeking investors, is not supported by a business with the cash flows needed to pay the dividend?

Identifying these troubled companies, and avoiding them regardless of how high their dividend is at the moment, is key to building a strong portfolio.

Don't get burned buying a stock without business operations that can support the dividend. Chasing yield could leave you holding the bag once dividends get cut and share prices fall. Find out how to avoid these traps in this week's webinar "How To Avoid Dividend Traps."

CEO David Trainer, a Wall Street veteran, will discuss why investors must be wary of high dividend yielding stocks. He'll go over how dividends are not always correlated to cash flows, how unprofitable companies can continue paying dividends, and discuss some of the findings in our recent special report "4 Dividend Traps to Avoid." The webinar will be held live on October 29th at 4pm EST.

Click here to register for the free webinar "How To Avoid Dividend Traps."

Analyst's Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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