Investors often ask: "What are the advantages of a dividend stock?"

Senior analyst Anand Chokkavelu (who has given his thoughts on the subject here) sat down with James Early, lead advisor of The Motley Fool's dividend investing service, Income Investor, to discuss the question.

James pointed to potentially lower risk and increased flexibility as two reasons to think about dividend stocks. Specifically, cash dividends take money out of management's hands and put it into yours to reinvest as you see fit.

He does caution investors to take into account the tax effect of dividends and to beware of dividends that seem too good to be true (yields above 8% are especially suspect).

When asked to name a couple of quality companies that he's waiting for higher yields on, he pointed to Wal-Mart (NYSE: WMT) (yielding 2.3%) and McDonald's (NYSE: MCD) (yielding 3.1%).

Watch the video here:

James Early doesn't own shares in any of the companies mentioned. Anand Chokkavelu owns shares in McDonald's. Wal-Mart Stores is a Motley Fool Inside Value recommendation. The Motley Fool's disclosure policy gets camera-shy.