How To Avoid Dividend Stock Traps

In this video, I discuss how to avoid dividend stocks that look good, but end up being value traps.

The best way is to compare the company's free cash flow to its dividend. If the free cash flow does not exceed the dividend by a lot, there is a good chance that the company will need to either cut the dividend, or take on additional long-term debt to pay the dividend. The latter is what happened in the case of Exxon Mobil.

It is best to stick to companies where the dividend payout ratio (dividend per share divided by earnings per share; or dividends divided by net income) is 60% or less.

Not investment advice! Consult a financial adviser.

My video warning about Exxon Mobil from 2018:
youtube.com/watch?v=DIpsVULjDEc

Exxon Mobil (XOM) cash flow statement:
finance.yahoo.com/quote/XOM/cash-flow?p=XOM

XOM dividend history:
morningstar.com/stocks/xnys/xom/dividends

XOM Value Line report:
research.valueline.com/api/report?documentID=21…

Matthew Kratter is the author of the Amazon best-seller "A Beginner's Guide to the Stock Market":
amazon.com/Beginners-Guide-Stock-Market-Everyth…

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