When searching for dividend stocks to buy, finding companies with high dividend yields is important, but it's just part of the process. Dividend yield alone won't tell you much about the quality of a company's dividend. In other words, it's equally important to select companies that have highly profitable businesses that support their dividend payments with cash flow. After all, a company that pays out money to shareholders that it doesn't bring in from cash flow is in an unsustainable situation. These types of companies often cut their dividends, which is the worst possible outcome for dividend investors.

With that in mind, if you're in the hunt for dividend stocks, finding companies with the best balance sheets is a great start. Analyzing a company's credit rating can tell you a lot about its financial position, and its ability to pay dividends to shareholders.

That's why three companies with AAA-credit ratings from Standard & Poor's, which are Johnson & Johnson (NYSE:JNJ), ExxonMobil (NYSE:XOM), and Microsoft (NASDAQ:MSFT), are excellent candidates for dividend investors.

Little debt to worry about means more for shareholders
Companies that are saddled with lots of debt will place great burdens on themselves, because high interest expense means there won't be a lot of cash left over to send to shareholders. This is particularly true if interest rates begin to rise, which is a real concern for many companies, since interest rates are still at historic lows.

The reason J&J, ExxonMobil, and Microsoft earn the highest possible credit rating from S&P is that they are megacap businesses with sizable economic moats and very manageable debt levels. They not only generate lots of cash flow, but they also don't have a lot of debt to service, which means they can pay sustainable dividends.

The long-term debt-to-equity ratio is helpful in analyzing a company's debt position. It measures how much interest-bearing debt a company is carrying in comparison to its level of shareholder equity. A lower ratio means that shareholders, not the company's creditors, own the majority of a company's assets. On this basis, each company is in great shape. Here is a rundown of where each company stands when it comes to long-term debt:

Company

Long-Term Debt (Billions)

Shareholder Equity (Billions)

LTD/Equity Ratio

Johnson & Johnson

$13.3

$78

17%

ExxonMobil

$11.8

$188.1

6%

Microsoft

$18.4

$90.1

20%

Source: Most recent 10-Q filings.

Each of these companies carries very little debt on their balance sheets. That means that they're free to return most of their profits to shareholders, through dividends and share repurchases. Indeed, J&J, ExxonMobil, and Microsoft each pay solid dividends and have raised their dividends for many years.

For instance, Microsoft raised its dividend by the most of the three this year, by 11%. The stock pays a solid 2.7%. ExxonMobil and J&J, meanwhile, have impressive records of annual dividend increases. ExxonMobil has raised its dividend for 32 years in a row and yields 3%. J&J has done its shareholders even better. It holds one of the longest track records of dividend raises, having bumped up its payout for an amazing 52 consecutive years, and it pays a 2.7% dividend.

To find strong dividends, start with strong balance sheets
Income investors on the hunt for dividend yield should keep in mind that there is more to a stock than just its dividend yield. Often, the stocks with the highest dividend yields are those that have seen their stock prices collapse because of deteriorating financial performance. It's critical to avoid these companies, because they are likely to cut their dividends at some point.

On the other hand, the companies with the longest track records of successfully maintaining, and even raising, their dividends regularly are typically those with great balance sheets. One of the best ways to analyze a balance sheet is through the long-term debt-to-equity ratio. ExxonMobil, J&J, and Microsoft are each in great financial condition, with very little debt on the books to worry about. That means investors can count on their dividends to keep rolling in for years.

Bob Ciura has no position in any stocks mentioned. The Motley Fool recommends Johnson & Johnson and owns shares of Johnson & Johnson and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.