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The first lessons most individual investors learn about the stock market are to look for stocks with low price-to-earnings (P/E) ratios and high dividends. These data points are even readily available in many newspapers. Unfortunately, they do not provide enough information to deliver investment success.Value stocks might offer low P/E ratios and high dividends, just like a stock headed for trouble might.To avoid the problem socks, many professional investors look at cash flow in addition to looking at earnings. Earnings are reported under complicated accounting rules and could rise even as the company is experiencing problems. Cash flow measures the amount of dollars (or other currencies) that a business generates as revenue and uses to pay its bills. It is measured in real-time, unlike earnings, which are reported based on when revenue and expenses accrue to the business.
Shares have been on a tear this year, but investors still have time to jump on board.
The bears' call for a pullback in this "overbought" market aren't costing me any sleep, because I'm doing this...
Investors starved for higher interest rates could spark a bull market in dividend-paying stocks.