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Dividend Stocks With ROIs Above 15 And Forward P/Es Below 12

July 12, 2012 – Comments (0) | RELATED TICKERS: IBM , LLY , XOM

In looking for the right dividend stocks, investors must look beyond dividend yield. The hot demand for dividend stocks has overvalued some income producers which has dropped their yields. The increased stock prices make these stocks a less attractive investment. Therefore, investors must take valuation as an important determent to a stocks potential return.

To stay away from value traps or cigar butts, investors should look at how the business model is performing. There is no perfect way to measure the business model but I prefer to look at the return on investment (ROI). Return on investment is simple the gain on investment minus the cost of investment divided by the cost of the investment. ROI is one way to determine the efficiency of a business and to compare the efficiency of a number of different businesses.

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