Owning dividend-yielding stocks is a great way to generate income. But many investors don't fully understand the ins and outs of dividends and how to identify the risks and rewards. Here are six simple points to consider if you're ready to buy some stocks that pay you to own them.
When a company pays a dividend, it pays out a percentage of its profits to its shareholders. That percentage its called the payout ratio. If the payout ratio stays below 100%, the dividend is considered safe, though there are varying levels of safety. If it exceeds 100%, the dividend could be cut.
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Source: Fool.com