WHEN CHOOSING STOCKS, PAY ATTENTION TO DIVIDENDS (FINANCIAL FOCUS)

This "Financial Focus" column is prepared by Edward Jones Investments, headquartered in St. Louis. Jones includes branches throughout the nation, including Cape Girardeau and Jackson.

If you asked most people why they bought a particular stock, they'd probably tell you it's because the stock has done well or is expected to do well. What they mean is that the stock's price has appreciated significantly, or has the potential to do so.You cannot predict the future of a particular stock by reviewing its price history. But by studying its past performance, you may be able to get some sense of what to expect under various market conditions. In other words, a stock's track record is something you will be interested in.However, a stock's price appreciation -- or potential for appreciation -- is not the only reason to buy it. Actually, a stock's total return consists of two parts: stock appreciation and dividend yield -- the rate of return paid on a stock in dividends. For example, a stock that sells for $50 and pays an annual dividend of $1 per share has a dividend yield of 2 percent.Of course, some good stocks don't pay any dividends at all, but many do. Unfortunately, when considering dividend-paying stocks, too many investors ignore dividend yield. If you are investing for long-term growth and not current income, should you really care about dividends? After all, you may plan on automatically reinvesting the dividends back into your stock.Even if that's the case, you should pay attention to the dividend yield, because it can tell you a lot about your potential investment.Actually, you may be more interested in a stock's dividend-paying history than its current-year dividend yield. Start by studying a company's dividend payments over the past several years. Have they gone up or down, or remained relatively flat? Companies that are able to quickly raise their dividends typically have rapidly rising earnings. And earnings growth is one of the most fundamental predictors of a stock's performance.Furthermore, a pattern of increasing dividends tells you a good deal about the way a company is being run. If a company has been able to consistently boost its dividends, then it has shown the ability to manage its growth well, despite the fluctuations and uncertainties always present in the market.When you're thinking about investing in a particular stock, you will want to pay attention to its history of price appreciation. But don't forget about the dividends, too. They're not glamorous, but they've still got a story to tell.

The Southeast Missourian does not recommend that readers buy or sell stocks featured in this column, which is provided for informational purposes only.