Buy EVERYTHING YOU KnowWhy is a specific stock yielding a dividend significantly greater than other stocks? There may be a number of reasons. A higher dividend is often an indication of high risk. If the risk is real or perceived is a question that all investor must determine. Another factor could be the type of stock. If it is a small business Development Company, a Master Limited Partnership, or a Real Estate Investment Trust the high dividend reaches least partially due to the federal government requirement that almost all the income is passed to the stockholder/unitholder to be able to maintain a corporate tax free status.A high dividend may be a result of the price of the stock having dropped significantly due to an overall downturn in the market, a downturn in that specific sector, or bad news for the reason that specific equity or in an equity with similar characteristics. Obviously once the price drops and the dividend stays exactly the same the yield rises. Again this may or might not reflect the actual valuation of the particular stock in mind. What all of the above boils down to is know the stock that you are evaluating. Know the business it is in, know where it stands versus its competition, and understand how it is performing currently versus previous quarters/years. Unless you know what a company does, or don't understand what it does you should eliminate it from your screening universe.Price Considerations/TimingWhere a stock's price is in its range is an extremely significant factor. Every stock moves up and down regardless of whether the marketplace is within an upward or downward trend. Many of these moves are market driven, plus some are driven by very specific actions. High yield stocks have a tendency to fluctuate greatly prior and after the ex-dividend date. The dividend capture crowd wants to enter on the dividend. Those thinking about capital gains need it before the pre ex-dividend rise, and sell prior to the ex-dividend drop. Many investors simply want to buy before the dividend, while others like to buy following the stock drops following ex-dividend date. Price can be greatly impacted when a company sells additional stock to generate funds.Since BDCs, MLPs, and REITs need to pass through most of their profits they frequently sell additional stock to invest in new growth. Very often this is perceived as a dilution and many stock holders sell immediately after this sort of announcement. The key here is to determine whether or not it is in fact a dilution or whether the new income from the growth funded by the sale of new stock will more than overcome the upsurge in shares outstanding. Usually the best way to make this determination would be to see what has happened historically as well as looking at what the business says they intend to do with the money received from the sale of stock. In a nutshell, being aware of a person stock's typical price cycle and what impacts it is crucial in terms of timing a buy.Statistical MetricsLook at price earnings ratios to see where a particular equity fits among its peers. If the PE is very high compared to other companies like themselves it increases a red flag. Likewise if it is too low in comparison to similar outfits the question is, why? Obviously a low PE caused by an irrationally low price is the kind of opportunity to look for. Metrics such as for example price to book value, price to sales, price to cash flow, should be viewed within the historical framework of this stock in question as well as the industry that it is in.Questions that need to be asked: Is the dividend safe? May be the dividend fully supported by earnings or distributable cashflow? What percent of earnings are paid out in dividends? In manufacturing companies it is important to know the company's debt to equity ratio. It is generally a given that it's better to have significantly more equity than debt yielding a debt to equity ratio of significantly less than 1. Similarly it is generally favorable to have more current assets than current liabilities, and an ongoing ratio of 2 or more is generally a good guideline. With MLPs, REITs and BDCs, these ratios do not give as clear an image and things such as for example distributable cashflow, hedging, leverage, yield curve, and interest trend, are as important or even more vital that you understand. Again, it certainly boils down to understanding the business under consideration.In evaluating high yield equities, size of a company is less important than its position among its peers, its historical performance and projected future results. It really is obvious, however that large more developed companies that have a long time of historically growing dividends are most likely safer than smaller, newer companies. However, the recent crisis on Wall Street and nov many giants proves that what may appear to be obvious may not be so, and what historically has been safe may not be in the future.AnalystsMost equities are evaluated by a minumum of one analyst and several are evaluated by four, five or even more. Opinions are based on fundamentals, technical analysis, or perhaps a combination of both. There are also many on-line services offering computerized analysis such as MSN Money (free) or Value Line (fee based) that plug a stock's metrics right into a formula which produces an "opinion". Analyst ratings are interesting normally one analyst will place a buy rating on a stock while another places a sell rating on a single stock using the same information. While considering analysts' opinions provides a helpful background check and is a way to obtain thought provoking information, they are not a replacement for your own homework and personal evaluation.No one knows what your own private criteria for buying, selling or holding a stock are much better than you. No one knows your tolerance for risk better than you. No one knows how much cash you should allocate toward a specific sector or equity a lot more than you. So while get more info is informative to check out analysts' reports, understand that they are only opinions, and if you research your options your opinion is often as good or better than theirs! Remember, nobody cares more about your money than you do!Copyright 2009 All rights reserved worldwide, Boyd Investment Holdings LLC.Bob Boyd invites one to visit the High Yield Equity Stock Report for further articles and a regularly updated high yield dividend stock list: http://www.highyieldreport.blogspot.com This site is dedicated to assisting investors with their due diligence in the highly volatile and often misunderstood group of high yield dividend investing as part of a diversified investment program.