Thomsett's  Instablog

It is quite easy for stock traders and investors to overlook dividend history as a strong fundamental indicator. A healthy dividend yield is likely to represent a large portion of overall portfolio profits, however, so comparing yields is a smart step for reducing a list of candidates.

But there is even more.

Going for the highest yield is not always smart. A stock that has lost a lot of value is likely to report a high yield, since dividends declared are per share; the lower the price, the higher the current yield. Maje sure your informaiton is up to date by using a quick and easy source for news, especially dividend and earnings trends, at newsfeed

The smart way to use dividends in picking stocks is to look at the 10-year record. Find companies that have increased their dividends every year for 10 years or more. These "dividend achievers" tend to be less volatile than average, and have also tended to experience growing stock price as part of their history.

The ability to increase dividends demonstrates sound cash flow management. A company must have cash in order to pay cash dividends, so a 10-year record of growing dividend payments simply makes sense.

There are going to be dozens of candidates meeting this test, so how do you know which one to buy? An easy answer is to look for an exchange traded fund (ETF) that holds a basket of dividend achievers. There are several.

Check out some of these:

- Power Shares (PFM, PHJ, PEY, or PID))
- Vanguard (VIG)
- Blackrock (BDV, BDT, or BDJ)
- Vanguard (VDAIX or VIG)
- Claymore (CDZ)