Archive · 11 Oct 2026
Three Checks Help Investors Distinguish Dividend Stocks From Traps
A dividend is money a company pays to its shareholders.
A stock may look attractive because it pays a lot compared with its price, but that alone does not make it a good choice.
The payment needs to be sustainable.
Pankaj Pandey of ICICI Securities says investors should also look at whether the company’s earnings are growing.
They should consider how expensive the stock is compared with the company’s profits.
Investors can also check whether the business generates cash and uses its money efficiently.
Its ability to grow and the strength of its balance sheet matter too.
Looking at these factors together can give a fuller picture than looking only at dividend yield.
A high dividend yield may attract investors, but it should not be the only reason to buy a stock.
ICICI Securities’ Pankaj Pandey says dividend durability matters more than a high yield alone.
The article’s model estimates shareholder return as dividend yield plus earnings growth, adjusted for valuation changes.
Investors are advised to review recent company performance and measures such as its price-to-earnings ratio.
Business assessment should also consider capital efficiency, cash flow, growth runway, and balance-sheet strength.
- Who
- Investors considering dividend-paying stocks; the article cites Pankaj Pandey, Head of Retail Research at ICICI Securities.
- What
- Guidance on evaluating dividend stocks beyond their dividend yield.
- Why
- To assess whether dividends are durable and whether a stock may offer broader shareholder returns.
High-yield appeal
Broader investment assessment
Whether high dividend yield is enough to select a stock
High-yield appeal
A high yield can attract investors and may serve as one factor or a starting filter.
Broader investment assessment
Pandey says yield should not be the sole selection criterion; dividend durability, earnings growth, valuation, and business quality also matter.
- Expert quoted
- Pankaj Pandey, Head of Retail Research at ICICI Securities
- Dividend yield
- Annual dividend paid by a company as a percentage of its stock price
- Dividend yield’s role
- A possible starting filter, not a sole investment rationale
- Shareholder return model
- Dividend yield + earnings growth ± change in valuation multiple
- Valuation measure cited
- Price-to-earnings ratio (P/E)
- Business factors to assess
- Capital efficiency, cash flow, growth runway, balance-sheet strength, and valuations