6 Secrets of Dividend Investing:How You Can Earn Great Returns with Less Risk

Finding the best dividend stocks takes some legwork and careful analysis. But here's how you can find the best long-term winners:
1.Avoid the Highest Dividend Stocks — You can't pick stocks by dividend yield alone. Above-normal dividends are often a red flag for a company in distress. Studies have consistently shown that you will earn higher long-term returns by avoiding risky stocks with overly high dividends.
2.Beware the “Dividend Time Bombs” — Not all dividends are created equal. Even if a company has a generous dividend, it must be able to maintain it. A "doomed-to-be-cut" dividend can be worse than no dividend at all. Once a dividend is cut, it's likely to make the share price fall also.
3.Cash Is King — Free cash flow (FCF) is the true health of the business. Find the companies that generate tons of it. Even in the worst of times, those flush with greenbacks have options. Firms with cash can buy back their shares to raise stock prices, make their debt payments, increase dividends, and buy other profitable businesses. That's why cash flow is the single most important factor that determines value in the marketplace.
4.Don't Focus on Income without Growth — Only growing businesses are truly healthy. So cash flow needs to be strong enough to not only pay a healthy dividend but also generate enough cash to grow and stay strong strategically.
5.Don't Forget Value — An investment's total yield depends on both the dividend amount and the stock price. Stocks of companies making real products and real profits often don't make the headlines. So dividend stocks can also be a great source of hidden value. Finding value by focusing on dividends first can help you avoid catching the "falling knives" that trap some value investors.
6.Have a Longer-Term Focus — Many brokerage houses make investment recommendations based on a very short-term view of the world — often a maximum 12-month timeframe. Individual investors should have at least a three- to five-year view when considering investments. More time helps you fully realize the true power of compounding dividends.
At Income Investor we do all this legwork and much more before we recommend any stock to you. We have truly looked under the hood, kicked the tires, and taken a thorough test drive before we put you behind the wheel of any investment. Our stock screening system sifts out the highest potential stocks from around the world.