Since dividend yield is the ratio of a stock's dividend to its price, it is possible for a stock to suddenly become a high-yield stock just because its price has dropped. And there is likely a good reason. The firm could be in a cash crunch, or its market could be shrinking. If so, it is a good bet that the dividend checks won't be as fat in the future. The trick is to find a stock that has a high yield because its dividend is high and steady--or rising--and not because its price has weakened.
Philip Morris fits the bill. Its dividends per share rose at an average annual rate of 11% per year between 1996 and 1999, and the rise was steady, with gains in every year. Even when its earnings fell in 1998, Philip Morris still raised its dividend.
Is the Payout Ratio Rising? >>