NEW YORK (TheStreet) -- I love dividend stocks and you should, too. Dividend stocks help shield portfolios from the ups and downs of our crazy market filled with weak deflationary fear-ridden economic numbers one day, followed by high food prices the next.
That's why I want you to look into Microsoft (MSFT), Ford Motor (F) and Simulations Plus (SLP). These dividend plays are hot!
Study after study demonstrates that in the long run dividend stocks build investor wealth more consistently and at a higher rate than non-dividend stocks. Using historical results as our guide to gauge what to expect moving forward, dividend paying stocks offer the best that investing has to offer.
But did you know that the highest-yielding stocks can actually have a lower performance expectation? It makes sense -- the highest-yielding stocks are often the ones that have experienced rapid price declines as a result of deteriorating investor confidence.
So why look at these three companies? Our goal is to find the highest-yielding stocks executing their business model and likely to continue sending the quarterly checks to your mailbox. In my quest, I have created rules or guidelines companies should pass to become a candidate as a long-term hold.
To make the cut, a company:
- Must be liquid and trade with a small bid-ask spread to avoid slippage.
- The company must have a history of dividend payments and increases in payments.
- The company needs to demonstrate the ability to continue paying the current dividend or more.
- The stock chart must be in a bullish uptrend; there is no point in looking for an oversized yield if the shares are expected to drop as much or more in the next year.
How can you take advantage? Make sure the industry and the company aligns well with your investment objectives. Use your current professional knowledge as applicable to ensure you have a market edge when entering or exiting a position.
Remember, your greatest advantage is your ability to limit your exposure to industries you already understand better than the overall market.
Now, let's look at my Big 3.