FUNdamental Side: Stock Picking Base on Dividend

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Share in the company's profit


As they say you are either a stock trader or a stock investor/business owner(yes when you buy a company’s stock and just hold it and have no intention of selling it you become more of an owner of the company and not just a buyer and seller of stocks).

If you decided to hold your stocks for long it would be good if you pick stocks that give a very good dividend. The secret to be one of the big company’s owner is to accumulate their stocks. You might have heard stories where a certain company was once owned by Mr. T but after sometime Mr. T’s ownership decrease and another person, Mr. A, keeps buying stocks of Mr. T’s company and thus after accumulating and accumulating Mr. A became the majority shareholder making him technically the owner of the company.

If that is what you want to be in the near future, you must invest your hard-earned money on stocks that are stable and give a regular dividend. I gathered up some information and squeezed out my brain to give some pointers that will help you pick the best dividend stocks.


As discussed in earlier post there are mainly cash, stock, and property dividends.

Why did I say choose the one that gives cash dividend?

If given a choice cash dividend actually increases your purchasing power so if you have cash coming you can start planning your next buying point probably of the same stock or other stocks. Some people have this notion that stock dividend gives you added value of your holdings. What stock dividend does is actually increase your number of stocks but the value of you r if your investment stays the same. You can make good of a stock dividend if such stock has a price trending up. Thus having extra shares to sell which you technically acquired at zero cost will truly give you value.


It is so tempting to just buy and buy companies that announced a cash dividend but you got to always use your limited funds wisely. To make sound judgement to which stock to buy one has to use several ratios which could include Dividend Payout Ratio, Dividend Growth Rate, Dividend Yield, and Return on Investment.

Use these metrics to make decisions which dividend paying stocks to hold. Such ratios will be discuss in further detail on other post.


Finally make a background check of the company.

A company that gives lots of dividend might be in trouble and is using dividend as its marketing tool to keep the stock being bought and sold in the market. Also a starting company that gives out huge cash dividends might later have cashflow problems and will result to  borrowing or issuing more stocks to the public to sustain its operation.

Always be mindful that under the Corporation Code of the Philippines a corporation can only declare dividends up to the extent of its retained earnings. Giving beyond that makes such dividend more of a return of investment than handing shareholders out a share in the company’s profit.

Also companies that give minimal or no dividend even if they make good profit might be planning an expansion. At times it may not be good but if you are to be one of the company’s owners better not get dividends in the earlier years of the company but reap it when the company booms.

Make due diligence as well which company to invest to. Check how stable  the company is by looking at its financial statements. A good track record of net income for the past 5 years would be good but also check the spending the company does. Some companies may have made good profits in a year but may have spent so much and thus draining available cash for dividend payout. Make sure that the company has a healthy balance sheet with a good Debt to Equity Ratio

About the blogger

Louis Delos Angeles is a Certified Public Accountant, blogger behind Investing in Philippines, and author of Investing in Stocks: Preparing for the future small amount at a time. Check him out in Google+ Learn more about Louis and his financial freedom advocacy here.

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1 comment for “FUNdamental Side: Stock Picking Base on Dividend

  1. Gary
    July 13, 2016 at 6:40 pm

    Hello sir, my question is how can I invest on the company get a broker? Go the company’s website? And my final question is how can you get the dividend from the company that I invested in? Thank you in advance sir. Thank you also for the wonderful blog of yours.

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