Aren’t the stocks with the highest yields automatically the best dividend stocks?
Not necessarily. It’s easy to find lists of the highest-yielding stocks, or to generate such lists by using simple stock screening tools. Some firms use such lists as “teasers” to entice unsophisticated investors. They use headlines like “Highest Yielding Stocks Revealed” or “Wall Street’s Secret Stock That Pays You 18%!” as if there were some magic to it. Such ads are for suckers. You can find those stocks on your own in two minutes. The problem with really high yields is that they often are not safe. There are just two ways a yield can get really high: The price of the stock plummets (so the divisor in the equation [Dividend ÷ Price = Yield] gets really low), or the company pays out practically all (or even more than all) of its profits in dividends. In the first instance, the price of the stock plummeting may be a good thing (the market is temporarily undervaluing a really good, solid company), or it can be a very bad thing (the company is in trouble and investors are fleeing its st
