When investing in a dividend stock you don’t base your decision to invest on the yield alone. Value plays an important role because after all, we want that stock to go higher while we own it. That’s what makes dividend investors rich, stocks that go higher and pay out dividends as they go.
The P/E ratio, or price to earnings ratio, is a great indicator of value. It represents the price paid per share compared to the net income of the company. According to the Wall Street Journal, the average P/E ratio of stocks in the Dow is 17.19. The Nasdaq average is 16.71. Read more