Do you like to rely on stocks' dividend income? Whenever a stock seems to pay a very high dividend yield, it's a sign to take a second look and find the reason why.
Dividend yield equals dividend per share/price per share, so when the stock price falls the dividend yield rises. Therefore falling dividend stocks tend to pay high dividend yields (these are referred to as "value traps"). Unfortunately, their ability to continue paying a dividend may be in jeopardy.
To find out whether a high yield company can continue paying its dividend into the future, look at its profitability.
We ran a screen with this idea in mind, searching for high dividend yield stocks with higher gross, operating, and pre-tax margins than their industry averages.
Business section: Investing ideas
Below is the final list of stocks from this screen. These high dividend yield names have high profitability, relative to their industry averages, which may contribute to a strong dividend.
Do you think these stocks pay solid dividends?
Use this list as a starting point for your own analysis. (Click here to access free, interactive tools to analyze these ideas.)
2. Empire District Electric
3. Public Service Enterprise Group
4. Strayer Education
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Alexander Crawford does not own any of the shares mentioned above. Profitability data sourced from Fidelity.