How to Find the Best Dividend-Paying Stocks for You

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If you find yourself always on the hunt for the best dividend-paying stocks for your portfolio, that's because one of the most discussed topics in the past two years has been the search for the right income investments.

We all know the story and the problem.

The U.S. Federal Reserve has lowered interest rates to basically zero and has made it clear it intends to keep them there for years. The hope is that this eventually spurs the economy and returns us to a state of economic growth.

While we don't know how the Fed's efforts will succeed given two more years, we do know that it has created near impossible conditions for investors in search of income.

In the early days of zero interest polices it made sense for investors to turn to the stock market. They'd buy the beaten down shares of drug companies, real estate investment trusts (REITs), and other high dividend-paying stocks.

Those who did so in 2009 and early 2010 have done very well as the stocks have appreciated substantially, in addition to providing cash flow from dividends.

Then Wall Street noticed the need for income and the sale machine was cranked up to provide products. Mutual funds, exchange-traded funds (ETFs) and other income vehicles were heavily marketed to the public.

As always the tremendous cash flows generated by the Wall Street commission machine have pushed up prices to the point that most of these dividend strategies no longer make sense for most investors, and share prices have appreciated to the point that they are no longer bargains. It does not make sense for investors to risk a large loss to gain less than a 3% dividend payout.

What does make sense is that investors seeking income should look elsewhere and behave differently than the crowd to achieve their goals.

This means taking the following steps when searching for the best dividend-paying stocks.

How to Find the Best Dividend-Paying Stocks

The first step is to assemble a list of potential investments that will reward you with solid dividend payouts without exposing you to serious long-term capital losses.

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