Many professional investors place the highest value on dividend stocks by analyzing a company’s current market value versus intrinsic value, according to TheStreet.com. The current market value represents today’s stock price while the intrinsic value reflects the underlying health of a company based on cash flow statements and profit margin.
If the intrinsic value of a company is worth more than the current market value, investors consider the company undervalued. Warren Buffet, the famed billionaire investor, uses this philosophy to locate stocks that have the potential of producing higher than average dividend yields. However, the actual value of dividend-paying companies, aside from yield, depends on a company’s overall health.