In 2008 the S&P 500 did a nose dive. In 2009 it reversed itself. Since January, 2010 the S&P 500 has traded in a very small range and as of March, 2010 is at the same position it was in at the beginning of January, 2010. There are many different viewpoints of what the stock market is going to do during the remainder of 2010 and going forward. In order to make money in your investments during this and other volatile times it is important to establish a defensive position in your trading strategy. One of these strategies is to find dividend paying stocks that you can buy that will help you to make money while possibly experiencing a potential roller coaster ride. In this way, you will continue to make money with your investments.

In developing an investment strategy, you want to be able to beat the return you would have gotten if you have put your money in the Treasury Fund. This is because you are taking on more risk with an investment in the stock market so you should be rewarded for it. However, with any stock market investment you should always be thinking of long term rewards. If you will need the money in a very short term, you should not be investing in the stock market. Because you will want to make more money than the Treasury Fund, you should look for dividend paying stocks that have a higher dividend yield than what you can get in that fund.

You should look at more than the dividend yield. If you were only going to look at the dividend yield, then it would be a simple matter of using a filtering screen to find the highest paying dividend stocks and put your money in those stocks. However, just because a company has recently paid out high dividends does not mean they will continue to pay these high dividends. They may choose to discontinue the paying of dividends or to reduce them.

In evaluating dividend paying companies, you should look at a few other items. The first one to look at is their balance sheet. This is a statement as of a period of time that shows what their assets and liabilities are. If the company has high liabilities and is losing cash for whatever reason, it is a good idea to stay away from them. They will probably need to reduce their dividends at some time due to a problem with cash flow. The stock price will drop in anticipation of this action. In relation to this, you should review their cash flow statement and determine where their cash is coming from. The second thing you should look at is the income statement. This will show how profitable they are. If their trend is a downward trend in their revenue and profits, this will probably translate into a reduction of cash at some time. Look for stable companies with sustaining profits and a good cash flow.

You should also look for a long term history of these dividends. A company who has developed a reputation for being a high dividend paying company will often do all they can to continue paying these dividends. They do not want to hurt their reputation. So look for companies with a history and not just some company that has begun recently to pay out dividends.

A good diversification policy is also a good idea. Be willing to invest in several different companies or even in a fund that specializes in dividend paying companies. In this way, you will be able to obtain the best of two worlds. You will have your money spread over several different funds and have the rewards of obtaining dividends.

Of course what you will need to realize that investing in dividend paying stocks is not a get rich quick method. It will take some time to grow your investment. However, what you will do with this method is to continue to beat the return you would have gotten with a low risk investment in the treasury bonds or with a money market investment. You will also be able to beat the unseen risk known as inflation. Too often, people do not consider this risk. However, it is a real risk that each of us should be trying to beat.

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