Checkpoints for avoiding dividend traps

With returns on cash at historic lows, many income-seeking investors are looking to the share market for its higher yields. This is not without its risks, though, as BHP shareholders found out earlier this year. Dr. Don Hamson, Managing Director at Plato Investment Management, says a lot of investors are approaching it in the wrong way. “A lot of people are trying to pick the winners; we’re actually focussed on avoiding the losers.” Avoiding losers is easier said than done, so in this interview, he provides some practical tips for avoiding the blow-ups. “If a stock is trading at well over 100% payout ratio based on last year's dividend and the expected earnings this year, then that isn’t sustainable.” Watch the video to hear the rest of his tips on avoiding dividend traps.