Prajna Capital - An Investment Guide

Stocks offering healthy dividends can pay off in tough economic times. But be careful of high yields in the financial and utility sectors EVEN if stocks go nowhere this year—a distinct possibility as US recession looms—investors can get returns by hunting for companies that pay healthy dividends. You receive the company’s quarterly payouts even if its stock, and the entire market, heads south. While this is a popular and often successful strategy during bear markets, it also entails some dangers. Watch out for stocks that offer an especially high dividend yield. That could signal that a company might not pay its dividend. For example, since the credit crisis began in July, financial firms have been disappointing investors by slashing dividends. At the other end of the spectrum, profitable companies with airtight balance sheets often offer pitifully low dividend yields. The other traditional dividend play is the safe, boring utility sector. Heavily regulated, utilities offer slow growth...