Extra Money

This is part eight of a series on how to make extra money with stock dividends.  At this point we are doing research to decide which stocks we want to invest in.

If you find a stock with a high yield you need to determine why the yield is high.  If the yield is high because the stock price has gone way down than you need to look at what has caused the decline in the stock price.  Although we are focusing on companies that have a long streak of consistently increasing dividends these streaks do sometimes end. We need to determine if a dividend cut might be coming which would defeat the purpose of our purchasing the stock.

Bank of America provides an example of this. Last year Bank of America cut its dividend after a long history of consistently increasing dividends.  It wasn’t exactly a secret that financial stocks were being hit hard but many people still bought this stock for the yield only to see the dividend significantly cut later in the year.  You won’t always be able to predict when a dividend cut is likely but if you are worried a stock might cut its dividend you should probably pass on that stock.