A Conservative Approach to Screening for High Dividend Yields

    by Wayne A. Thorp

    Dividends have regained some of the luster they lost during the raucous tech boom of the late 1990s. Two major reasons for this are:

    • A “flight to quality” by investors stung by the market collapse following the bursting of the Internet bubble, and
    • A change in the tax law that now taxes many dividends at a more favorable rate.
    Conservative investors are attracted to dividend-paying stocks because the dividends—and the yields on dividend-paying stocks—provide a bit of a safe harbor during market tempests.

    A conservative, low-cost way to invest in dividend-paying stocks is through dividend reinvestment plans. With these plans, dividend payments are put to work immediately with little or no transaction costs involved. [For more on the basics of dividend reinvestment plans, see our annual guide.]

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