If your top priority with the stock market is to buy stocks with the greatest yield on your money at some point, you will be burned. If your investment strategy is to examine the dividend paying companies by their highest yield and buy them on that strategy, you will lose some of the time. The top reasons for losing money by chasing yields is not asking: is the yield sustainable? or will it continue? and why will it continue?

There are plenty of good solid companies which pay dividends and are sustainable  – one of the easiest to look at is utility and pipelines. These groups fall under government regulation which means higher barrier for competitors and the regulatory body gives the companies regular approval to raise rates. A great example of a good pipeline is Kinder Morgan.. The company is well run, recently grew and is worth looking at. The company was the basis of Enron before management thought selling fiber optics was a faster growing business and sold the pipelines to Kinder Morgan.. Enron went bankrupt, the owner of Kinder Morgan is a billionaire. For the foreseeable future we will be using oil and natural gas to run the economy and someone has to move the oil and natural gas from where it comes out of the ground to the where consumers can use it.

Generally if a company has a high yield for their dividend payments you cannot buy and hold, if you buy, you have to watch every quarter  because there is a reason why the yield is high. The market does not believe the business model the company is using is working well. The best example is the companies that produce the Yellow Pages -many people grew up using them, but do they now use them? Is there a need, probably, but it what form and how much can the company charge? Can some money be made yes, will money be lost both on the dividend and the stock price yes. Take your chances or better buy companies that have a long history of paying out dividends, have a dominant market share, and healthy financials If you buy those you can buy and hold and enjoy the dividends..

There are always more questions than answers, till the next time – to raising questions