You made it to the final installment of my dividend stock guide. Congrats! I suppose something that might be on your mind after the last two issues: So what are the affordable stocks that pay dividends?

I’ll get to that in just a minute, but first let me go over some cautionary tips before you start jumping in:

First, if a stock’s yield is too high, say above 8–10%, be cautious.

The company is trying too hard to “buy” investors. Or maybe the entire sector is too risky.

REITs, MLPs, business development companies and yieldcos must all pay out 90% of profits in dividends, according to the law, and that forces them to keep borrowing and raising money.

In a bear market or other financial catastrophe, they may not be able to raise the cash they need to remain in business. MLP prices are affected by the price of energy even though most of them simply transport it.

Many REITs own indoor and strip shopping malls. Thanks to ecommerce, that’s a declining business. Mortgage REITs are vulnerable to changes in interest rates.

However, there are many types of REITs. Some of them invest in luxury apartments. Some of them in housing for the poor. Some rent out work space to government agencies, biotech startups and small technology firms. One owns a large number of self-storage units.

Business development companies lend money to new businesses, so they’re potentially quite profitable — but risky.

Yieldcos purchase and generate “clean” energy generated by such renewable sources as wind, solar and hydroelectric. They are a new form of business entity, so they’re still unproven. However, renewable sources of energy are undoubtedly a hot trend.

Fossil fuels probably aren’t going away for a few decades, but that’s well within our lifetimes. If solar power supplies all the energy we need, we’ll stop drilling for oil and natural gas. That means MLPs will go out of business.

So yieldcos can be a good way to balance out that risk.

Utilities and telecoms are often dependable sources of high dividends. So are well-established consumer brands.

Because all these businesses are different, and have their own unique risks, it’s a good idea to diversify.

How to Choose Dividend Paying Stocks

Thinking of diving in? You might consider buying individual stocks or ETFs. Using ETFs can be a good way to diversify your investments within a sector.

When you buy shares in an ETF, you eliminate the risk of buying just one or a few companies. Because even if their sector booms, the companies you bought could be the failures. They could be the companies run by incompetent managers.

Buying an ETF which consists of all the major companies in a sector, can help you benefit from the sector’s success.

(However, for complicated legal reasons, MLPs can’t be in an ETF. To invest in a lot of them at once, you must buy a closed-end fund, but we’re not going there in this post.)

Finding High Dividend Stocks

You can easily find find articles with lists of high dividend stocks, such as this one. Or check out the dividend stocks Warren Buffett has bought for Berkshire Hathaway. Check out the top dividend income indexes, such as the Nasdaq Dividend Achievers.

They are:

Nasdaq Dividend Achievers Select™ (DVG)

A good selection of companies that have increased their dividends for the past 10 or more years.

Nasdaq Intl Dividend Achievers Select (DVGI)

International stocks that have increased their dividends for the past seven or more years.

Nasdaq U.S. Broad Dividend Achievers (DAA)

All U.S. stocks that have increased their dividends at least once a year every year for 10 or more years.

Stock Dividend Growth

Dividend growth is why many people think stocks are much better long-term investment than bonds. Bonds have a limited life. And the interest they pay every six months remains fixed.

Stocks hold their value as long as the company remains in business … and many companies raise their dividends year after year.

Of course, past results don’t guarantee future results — yada, yada — but a company that’s grown its profits every year for the past 10–25 years is more likely to keep growing them than a company without such a track record.

Examples of Affordable Stocks that Pay Dividends

ExxonMobil (XOM)

Large, established, and powerful oil company.

Coca-Cola (KO)

The leading soft drink company around the world for over 100 years.

Verizon Communications (VZ)

They’re the largest wireless service in the United States, and dominate the 4G market here.

Altria (MO)

Formed from a merger of Philip Morris and Kraft Food, they have a large and loyal base of cigarette smokers and convenience-food eaters.

Realty Income (O)

They manage thousands of properties around the United States, and have a long history of paying ever-increasing monthly dividends.

Examples of Long Term Dividend Stocks

Here are some of the ETFs that buy the Nasdaq Income Achievers Indexes:

The Nasdaq Dividend Achievers Select Index trades as the Vanguard Dividend Appreciation ETF (VIG).

The Nasdaq International Dividend Achievers Select Index trades as the Vanguard International Dividend Appreciation ETF (VIGI).

The Nasdaq US Broad Dividend Achievers Index trades as the PowerShares Dividend Achievers Portfolio ETF (PFM).

ETFs for other sectors that pay dividends include:

Vanguard Real Estate ETF (VNQ)

Vanguard Global ex-US Real Estate ETF (VNQI)

Vanguard Utilities ETF (VPU)

Nuveen Energy MLP Total Return Fund (JMF) (closed-end fund)

Vanguard Telecommunication Services ETF (NYSEARCA:VOX)

The Global X YieldCo Index ETF (YLCO)

Bottom Line

If you’re into getting in, diving for profits, then getting out — consider trading penny stocks. Dividends stocks are for getting in, then — hopefully — receiving regular checks for the rest of your life.

I plan to trade penny stocks until I can’t trade any longer. They’ve been good to me, and I love them. But I’m as vulnerable to illness and injury as anyone else.

And sometimes I’m busy educating new traders and traveling to places like Laos and Cambodia, where I’m committed to building 1,000 new schools for impoverished children. And sometimes I just need to relax. Dividend-paying stocks have the potential to keep on paying and paying — whether you’re watching them or not.