How can you tell a good dividend stock from a bad dividend stock? Fool analyst Todd Wenning recently created a proprietary dividend "report card" here on Fool.com, which gives a letter grade to each company's dividend.
The three questions that Todd thinks are most important to answer are:
- Over time, has this company steadily increased its payouts?
- How sustainable is the dividend?
- Does the company have room to further increase the dividend?
Three stocks that have received an "A" or "A+" on the dividend report card are Deere (NYSE: DE) (report), Microsoft (Nasdaq: MSFT) (report), and Procter & Gamble (NYSE: PG) (report). Todd thinks each of these companies has a strong balance sheet and generates plenty of free cash flow to not only sustain the current dividend, but increase it in the coming years.
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