Wednesday, February 4, 2009

These Firms Shouldn't Cut

I can't help but notice that in this environment many companies are electing to cut dividends in an effort to cut costs and return to profitability. Staying away from investments in these stocks before the cut is probably a good idea. Is there a simple method of determining which companies will be able to retain their dividend?

Asking these two simple questions are a great start to determining if a company is likely to maintan it's dividend.

1. How Does This Company Make Money?
2. What Is The Payout Ratio of Dividends on Earnings?

I believe that these are the two key questions and in next week's post I explain how you can use these two questions to shield yourself from firms that might cut their dividend.

This article was written by the moneygardener. If you enjoyed this article, please vote for it by clicking the Buzz Up! button below.

1 comment:

  1. you mean they cut dividends to conserve cash rather increase earnings.

    earnings and dividends are almost unrelated still there is no guarantees that even if earnings cover payout that dividend to be maintained


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