Many dividend investors automatically ignore high yielding dividend stocks because they assume that such high yields are too good to be true but there is much more to evaluating a dividend stock than just looking at its yield. Intelligent investors will look not only at a stock’s yield, but also at its payout ratio or the ratio of dividend payments to net earnings. www.eDividendStocks.com; By: eChristian Investing; Words: 606

In further edited excerpts from the original article* eChristian Investing goes on to say:

The average yield of dividend stocks in the Dow Jones index is now 2.9%. The S&P 500 sports 15 stocks with dividend yields above 6%. Those are pretty attractive yields for income investors, given that a money market account currently offers less than a 1% return.

A high dividend payout ratio is typically a warning sign that the current dividend level is unsustainable but below are details on 5

If you want to get rich with risk tolerance on your side, dividend stocks are the best place to start.

Here’s why…

Dividends are essentially a cash payout that you receive by simply
being a shareholder… like receiving a bonus based on a company’s
earnings.

Moreover, these “bonuses” offer lower tax rates than similar
investments in savings, CD’s or money market accounts. And, thanks to a
change in the tax law, dividends are now taxed at only 15%. That’s
considerably better than the 35%+ taxation levied against ordinary
income.

And in bear markets, dividend-paying stocks are the ones that
survive the storm and perform well, especially if those companies have
a strong history of increasing the dividend payout.

With yields on the benchmark 10-year Treasury note hovering in the
3.4% range, and likely headed lower, dividend paying stocks may prove
to be investors’ ultimate safety nets for 2010.

There is a reason, after all, these stocks are called “widows and orphans” investments….

The bulls have their reasons, of course. Manufacturing is recovering, they say. Green shoots are sprouting! What they don’t seem to know/care about is that the reason manufacturing is recovering has little to do with a better economy.

This from Payout Trader editor Charles Delvalle (who, by the way, is bullish on US equities in the medium term):

Truth is the economy is still circling the drain, albeit at a slower pace. The real reason why the Institute of Supply Managements Factory Gauge showed better than expected numbers was because of the 12% increase in government spending due to fiscal ‘stimulus’ programs.

The June report showed up at 48.9 – just shy of the 50 mark. If the ISM rises above 50 it signals growth in manufacturing; less than 50 signals contraction. This 50 mark is extremely important, because most economists look at it to determine whether we are in a recession or

“Stocks are clearly having trouble extending their gains,” reports today’s Wall Street Journal. And that a number of key market health indicators are flashing red right now.  When were these indicators flashing green? We don’t recall.

Our memory of the recent rally was on kicked-off by a bogus memo from Citigroup CEO Vikram Pandit about profitability, followed by a load of baloney from stress test regulators about banks’ health.

“People also are beginning to question whether the economic fundamentals are strong enough to justify continued gains,” continues the WSJ. This has got to be one of the most naïve sentences ever written. The 40% rise in stocks since early March never had anything to do with a 40% increase in economic fundamentals. The economy is collapsing (albeit at a slightly slower pace than before).

Stocks rose because the same “irrational exuberance” that got us into trouble in the first place