When a company makes money, it may occasionally distribute a portion of that profit to its shareholders in the form of cash dividends.

Someone who invests in stocks of companies that provide high dividends is known as a dividend investor.

The goal of a successful dividend investor is to build a portfolio of the stocks with the highest dividend yields.

Stocks that pay high dividends provide passive income

However, since yields typically increase when investors aren't purchasing the stock, a high dividend yield may be cause for concern.

Look for a dividend payout ratio between 60% and 70%, which may show that the company is saving some money for growth.

When the debt-to-equity ratio is higher than 1, it indicates that the company has at least $1 in net value for every dollar debt.

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