Blue chip dividend stock and Dogs of the Dow theory

A lot of investors who invest in the blue chip stocks would generally like to invest in stocks that are the blue chip dividend stocks. Now the best way to select the stocks is to find who has paid the best dividends in the last few years.

Dividend Yield

The main parameter to know when you are buying the blue chip stocks is the dividend yield. What that means is that when you are paying for the stocks which are giving the dividends you do not need to shell out more for the stocks while buying.

A dividend yield of 10 % means that you will have to have the stock bought at Rs.100 and the dividend it gave was RS.10. Now if the price rises then of course the dividend yield will reduce as you will be paying more to buy that stock.

Here is the list of the top ten stocks which have the good dividend yields.

Bank of America(BAC) – 9.09%

General Electric (GE) -  7.65%

Pfizer(PFE) – 7.23%

Du Pont(DD)

Alcoa(AA)

At&T(T) – 5.75%

Verizon Communications (VZ)

Merck(MRK)

Jp Morgan(JPM) – 4.82%

I have listed the dividend yields and these dividend yields have the benefit that you can then use this for the Dogs of the Dow Theory.

I will explain that a little later but here is what the people think about the stocks that are there when they pay out dividends. TheBlue chip dividend paying stocks mean that these stocks are

Very very stable

Good cash flows

The benefits of having the dividend paying stocks is that they make you money even when you are holding the stocks as opposed to growth stock which make you money when you are sell. You can use the dividends to reinvest in the stocks or buy some mutual funds.

Dividend investing is also a way of investing if you are trying to learn to invest stocks

Dogs of the Dow Theory

This theory says that buy those stocks which have high divined yields and that will means that these stocks share prices are lower than whet they should be. You will benefit when the stock prices rise for these stocks as the share prices are lower.

This theory was coined by Michel of Higgins in his book beating the Dow.

At the beginning of the years you will calculate the dividend based on the closing price of the last trading day and then buy those top ten stocks which have the highest dividend yield. Since the price is low and the yield is high the price will rise and you will gain good profits on these shares and may even beat the Dow.

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