How does the average investor find the best Australian dividend stocks that will complement their portfolio?
As a means of enjoying returns on an annual basis, this is a great way to add a different dimension to investing and trading without having to engage in a lot of analytics and pressure.
We will pass over everyday investor advice for those who want to seek the best Australian dividend stocks.
Establish Financial Objectives First
A piece of advice that applies to people finding the best Australian dividend stocks, or any type of stock for that matter, is to establish the financial targets and goals that the individual or group wants to achieve moving forward. Whether it is planning for retirement, building another source of income, financing a home deposit, paying off a loan or something else altogether, this will help to shape the kind of decisions that are made around dividend investing and where the smart money needs to be placed for the sake of short and long-term objectives.
Assess Earning Growth Rates
The best Australian dividend stocks will often be those investment options that boast quality long-term earning growth rates. The common gauge in this industry will be a figure from 5% growth and upwards with most maximising their potential around the 15-20% figure. There is a science behind how these rates are calculated with a number of contributing factors involved in the process, yet it offers a basic insight into their projected growth and what participants should expect in the years to follow given the state of play today.
Review the Dividend Yield
Domestic investors who are hoping to cash in on quality dividend stocks will do well to take note of the dividend yield that happens to be in play. The higher the yield, the better the returns will be for the investor. For example, if the stock is listed at $25 per share and the company pays $5 in annualised dividends, then the yield would be a very healthy 20%. It might be a basic calculation, but it helps to put into perspective what community members could stand to gain based on the track record of the enterprise.
Survey Payout Ratio & Total Return
The best Australian dividend stocks need to align with the reporting for payout ratio and total return sent back to shareholders. This ratio is determined by the percentage of the company’s overall earnings. For a business that earns $2 per share in net income and opts to pay $0.50-per share dividend to their shareholders, that will equate to a payout ratio of 25%. The total return will be calculated by a mixture of the dividend paid and the increase rate of the stock price.
Examine Debt-to-Equity Ratio of Organisation
A key process that participants need to follow when they do their research for the best Australian dividend stocks will be the debt-to-equity ratio of the organisation. The figure that is reached in this context will explain a lot about the progression of the company, how capable it is to meet its obligations and how liquid it is to cash in on market opportunities before delivering returns to shareholders. As a general rule, anywhere between a 1 to a 2.5 ratio is considered acceptable.
Connecting With Experts & Speaking With Experienced Sources
As much as individuals and groups can read reports, examine news bulletins and follow expert traders online, it will be direct discussions with industry specialists who deliver the best results. This is where people will be able to see what expertise and experience offers and how it shapes the decisions around the best Australian dividend stocks that are accessible. Brokers, consultants and agents who have a background with this form of investing will provide a platform for people to make savvy decisions.