Regarding sentiment, and stock valuation, this is the way I look at it, which to me makes sense (although it doesn't account for irrationality in the market).

Regarding sentiment, and stock valuation, this is the way I look at it, which to me makes sense (although it doesn't account for irrationality in the market). Let's say you have $100.00, and the market figures that you need to make a return of 4% per year. If you find a stock that gives dividends of $4.00 per year, that stock will then be worth $100.00. This is assuming that there is a really strong trust in this company, that it won't go out of business, won't grow or shrink in market share. Now let's add onto this that based on what the company is doing, and an analysis of their competition, and their ability (track record) of execution, that there is a really good chance that next year they will be able to make enough money to return $8.00 dividends per year. Well, that means that next year the stock will be worth $200.00 per share. And if it is going to be worth $200.00 per share next year, well this year most people will probably be willing to pay about $192 per share (that gives a 4% return on investment just in the stock price). You can extend this line of reasoning to factor in forecasted growth for a number of years into the future. Which is how you get stocks that currently only return a small fraction of a percent of their stock price in dividends (i.e., a $100.00 stock may pay 4 cents dividends, instead of $4.00, since market sentiment thinks the company will grow a lot in the future). So based on this, I would like to pick stocks that don't have a lot of growth forecasted, but do pay good dividends. Especially stocks that are in a market where they are protected from competition, or otherwise have a strong likelihood of not going out of business but provide the same thing they've always done, without growth but with good dividends.