Worried about the escalating Russian-Ukrainian crisis? The smart move now is to increase your exposure to dividend stocks. This asset class offers greater security, but with a lot of growth and income. Below, I outline seven surefire rules for choosing the best dividend payers.

Not only are prime dividend payers attractive sources of stable income, they also offer the potential for strong growth.

According to research by black rock (NYSE: BLK), high-dividend stocks outperform non-dividend-payers in all economic conditions, rising more than non-dividend-paying companies in bull markets and posting smaller declines in bear markets.

Your Checklist for Greater Wealth

Here are the main factors to consider when looking for the best high-dividend stocks for your portfolio:

Look beyond performance. A high yield can be a good starting point for evaluating high-dividend stocks, but it should never be the only reason you buy. You need to dig deeper and look for companies that can clearly maintain, and preferably increase, dividends over time.

Pay close attention to the company’s dividend history. You want to focus on stocks that have paid dividends over long periods of time. This is a key factor not only in judging the safety of dividends, but also the quality of the company as a whole.

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After all, a company that can sustain its dividend over the long term and grow it at regular intervals is backed by an underlying business that can generate strong and expanding cash flow.

In addition, a company of this caliber likely has a disciplined management team that takes great care in using this cash flow in its capital investment decisions, cost control, and performance management. debt.

I look for companies that have had no dividend cuts in at least the past 10 years, which shows their ability to weather tough times.

Beware of high payout ratios. Perhaps the most important data for income investors, if we had to identify just one, is the payout ratio. It is calculated by dividing the stated quarterly payout rate by the previous quarter’s earnings per share and is a comparison of the dividends to the earnings that make them possible.

Generally speaking, the higher the earnings relative to the dividend, the better that dividend is protected against corporate setbacks. A low payout ratio, ie the dividend as a percentage of earnings, is therefore the best possible sign that the dividend is indeed safe. Conversely, a high payout ratio is a sure sign of a threatened dividend. I am looking for a payout ratio of no more than 80%.

Look for rising profits. It goes without saying that you’ll want to make sure that the dividend-paying stocks you’re considering have a track record of steady or, better yet, rising earnings. But also pay attention to its earnings growth forecast.

I like to see a projected year-over-year revenue increase of at least 5%. This allows earnings and dividends to beat inflation and withstand the worst of any future rise in interest rates.

Take the long term. If you’re investing for income, you should always focus on the health of the underlying business. The best dividend-paying stocks are those that are in good shape and growing, so they can maintain and grow their payouts.

Over time, stock prices will follow these dividends upwards, so you will also earn capital gains by buying and holding. This approach also leads to less frequent trades, which lowers your brokerage fees.

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Take a steady stance, even during market downturns. As Warren Buffett once said, “Lethargy bordering on laziness remains the cornerstone of our investing style.”

Focus on revenue reliability. Have the stock’s earnings and dividends held up well in past recessions, such as the 2008 financial crisis? If so, that’s a pretty good reason to be confident about their durability in future market storms.

Examples of dividend-paying industries with reliable earnings include regulated electric, gas, and water utilities, royalty-generating energy midstream companies, such as pipelines, and large U.S. telecommunications companies.

Note that energy companies generally do not generate reliable and consistent revenue, due to their exposure to unpredictable oil and gas prices. However, there are a few exceptions, such as large-cap oil stocks whose massive scale gives them a huge advantage when it comes to weathering downturns.

Don’t overlook debt. The payout ratio is important. However, debt is also crucial for the stability of dividends. You’ll want to look for companies with healthy balance sheets, including ample cash and low debt.

It is important to keep in mind that what is considered a high level of debt varies by industry. Utilities, for example, typically have higher indebtedness due to the large sums they must invest to maintain and grow their operations. However, as noted above, they tend to enjoy more reliable streams of income.

Most important of all…keep it simple. This tip applies to all investments, not just dividend-paying stocks. Peter Lynch said it best in his 1994 book beat the street: “Never invest in something that you cannot illustrate with a pencil.”

US-based regulated utility stocks are good indicators of dividend growth. Public services provide essential services, a virtue that tends to make their actions recession-proof. They are also immune to shocks overseas, such as the current outbreak of war in Eastern Europe.

For our “dividend map” of the best utility stocks to buy, click here now. These companies are cash cows that generate juicy double-digit returns year after year. If you are looking for investments to sleep well at night, our dividend map is for you.

John Persinos is the editorial director of Invest daily.

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