What are high yield stocks and how do I find them?

Ready to invest in some high yield stocks. Willing to take a little risk and see where it gets you. Try high yield stocks; there are ways to find good ones.

High yielding stocks are investments that have a high rate of return. However, these high yield stocks generally will be ranked lower on with the rating agencies. This is due to the higher risk these have to default. Therefore, have to offer a higher return. A stock will offer a high dividend in order to compensate for a lower expected capital gain.

The more mature, well established companies would have a higher dividend yield. This is the opposite of the young, growth oriented companies. They will usually have lower ones or none at all. Newly growing companies are not as secure and do not have a dividend yield and all because they do not pay out dividends.

Figuring out a strategy to find great high yield stocks is a little tricky. The strategy involves finding stocks paying dividends yielding at least six percent annually, and likely to increase their dividend payouts ten percent, or so, each year. Your hope would be that over time, the stock price would follow.

To understand this a little better, here is an example of high yield stock.

Your dividend yield the next year's dividends divided by the share price you paid. Your dividend yield is ten percent if you paid $10 per share for a stock that paid out $1.00 per share over the next 12 months (dividends are usually paid four times a year). Your yield would only be 9.1 percent if you waited a week to buy, and you paid $11 per share instead of $10.

High dividend stocks are tempting investments, but only if those high dividends keep coming. Many factors play into the dividend consistency equation, but a strong balance sheet is essential. Following is a sample list of high dividend stocks with solid balance sheets. This is factitious and you should create your own sheet to track with.

Dividends and Dividend Yields

Company Name Leverage Ratio Est. Dividend yield %
Entertainment Properties Trust 2.1 4.5
Equity One 2.2 4.4
Healthcare Realty Trust 2 6.5
LTC Properties 1.2 5.6
New Plan Excel Realty Trust 2.4 4.5
One Liberty Properties 2.3 6

High yield stocks, chosen carefully, have two advantages over other stocks in a weak market.

• If the share price goes nowhere for a few months, you still collect the dividend, so you are paid to wait.


• If the stock drops, the dividend yield to new investors rises, attracting more buyers. Let me explain.

Here is an example of the math you will need to be looking at.

The dividend yield is the next 12-months' expected per-share dividends divided by the current share price.

For example, the yield would be 5 percent for a stock currently trading at $200 per share that is expected to pay $10 in dividends over the next year ($10 divided by $200).

The best way to find high yield stocks is to use the technique screening. Screening involves using special programs to scan the market for stocks that meet your selection criteria. There are several free screening programs available on the Web.

Do research through reading and screening. This will help you find the right high yield stocks for your investment style. Despite their tarnished reputations, it may still be a good idea to hire an analyst to do the heavy lifting when it comes to figuring out a company's future prospects