What we can do here is if we’re using Yahoo finance, go to the statistics and then you can look a little bit more about their actual dividend and their other Financial metrics that you can take a look at, but looking at their dividend, there’s a couple things that you want to be aware of. One of them is the payout ratio. This is a very important Financial Metric you want to consider when looking at dividend stocks and the payout ratio is essentially just going to be the dividends as a percentage of their earnings – what Shopify theme is that.So, if you look at the number being over 100%, it may be to some extent the red flag, which shows that the company may not be able to actually sustain the profit They're paying and that's it. I really want to warn you. You see, when I mentioned that I started to be very young in the stock market, I made a lot of mistakes because nobody was really showing me the way. 1 of them was that I was falling into a profit trap and I didn't want to see people do it for me.
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So essentially dividend tramps, what can happen is a company might have a very high dividend to attract investors and then either / These profits cannot come when new investors arrive or increase the value of their stock because they are paying so much in dividend payments that they are unable to reinvest in their business again. So, to give you an example here, when I started investing, I would look at companies obviously. Okay. Well perhaps he’s paying a 3% annual dividend then I’d find another company is paying a 6% dividend and then I say, well here’s this other company paying a 12 percent annual dividend. This looks like such a good deal and when something looks too good to be true in a lot of cases it is, that’s how it works in the investing world – when something just looks too good to be true, there could be something fishy behind the scenes that you might not fully realize at the moment.If you are looking at companies that are paying a lot of profit,You need to take a gander at the payout proportion, you need to see their benefit installment history just as the stock cost, you need to see their benefit installment history just as the stock cost because what you want to see is the benefit of the company in their life, rather than their stock. The value of and the equation of these two factors. To give an example here say that we have two companies. One company pays out a 6% annual dividend, but their company stock is losing four percent per year over the past ten years.Well, it can only be 2% of your total revenue every year because you are making a lot of profit but the company is not growing... In reality, it's declining, so that’s actually not that great versus maybe another company that’s Paying 3% profitable but growing at a rate of 4%, so you could only get 7% on that small share, but a company stock that’s actually increasing. So that’s a great example of something like Pepsi. They've been growing Coca-Cola for a long time in a way that benefits them, as well as their stock prices in the long run, which you will definitely consider.ReadMore: Few Things To Keep In The Mind Before Start A BusinessSo don't just look at profit. I kind of think of paying dividends as a cherry on top. It's not the first thing you want to see, but certainly, something you want to factor into in the equation as to whether you’re going to invest in that company or not invest in that particular company. Now, there are a number of different Financial metrics that are going to be incredibly important when looking at dividend stocks, one of them being the price to earnings ratio. This is especially important for people who are investing in those blue-chip stocks, where their stocks that are necessarily High fast growth but more so well-established company. So, the price to earnings ratio P/E ratio, you can have to take very close account into that and then also looking at the earnings per share. So how much money is this company actually bring in per share? What are the earnings on that?