Low price, high dividend

QI found a stock that's priced at less than $1 per share, but it pays out more than $1 per share in dividends. Good buy? Bad idea?

— E.P., Sacramento

ABad idea. Stocks trading for less than about $5 per share are penny stocks, which tend to be volatile and risky.

With dividend payers, you want them to be generating more in earnings per share than they're paying out in dividends so that their payouts are sustainable and unlikely to be reduced or eliminated. Hefty dividends are great, but a company needs to be strong enough to sustain them.

QA stock I own nearly tripled in value before pulling back, leaving me with a double. Should I have sold it when I could have reaped that big gain and rebought it when the price dropped? Or am I right to just wait, hoping to gain more in the long run?

— O.M., online

AIf you knew that it had temporarily peaked and was about to fall, then selling would have been a good move. But you can't know precisely what a stock is going to do.

When you buy a stock, you should have an idea of the degree to which it's undervalued. Ideally, you'll have estimated its intrinsic value. If the stock surges well beyond that value, then sell, because it's reasonably likely to fall from that point. If a stock keeps rising within reason, though, and the company remains healthy and growing, then over time its intrinsic value will rise, too — and you can do well by just hanging on for the long term. Measures such as P/E (price-to-earnings) ratios can give you a rough idea of valuation.