Stocks that provide dividends are an excellent way to build long-term wealth. Not only do dividends provide investors with regular income, but dividend stocks can also help investors weather market volatility. How? Whether the markets are going up, down, or sideways, dividends provide investors with a steady income stream.
Having said that, while dividends are usually paid out quarterly, at the discretion of the company’s board of directors, they can be raised, cut, or eliminated.
Not all dividend stocks are created equal. As a result, there are a number of factors investors need to consider when looking at dividend stocks.
Dividend yield is one of the most important factors to consider when investing in dividend stocks. It might be tempting to just invest in a stock with the highest dividend yield, but there is a risk/reward trade off when it comes to dividend-yielding stocks—the higher the yield, the greater the risk.
Stocks that provide an annual dividend of 10% or more tend to be very risky. Because they are risky, there is a greater chance the dividend could be cut—or worse, the share price could plummet. This means investors lose out on dividend growth and capital appreciation.
History is another important factor to consider. Look for stable companies that have a long history (five, 10, or even 25+ years) of both paying an annual dividend and increasing that dividend annually. Those stocks that offer annual dividend growth as part of their corporate culture are more likely to continue that trend.
The best way to determine whether or not a company can continue to provide an annual dividend and raise its yield is to look at the company’s free cash flow. Free cash flow is the amount of free cash, or money left over after it pays for operations and necessary capital expenditures. The more money a company has in the bank, the greater the chances are that it can sustain or increase its high dividend yield.
Why I Like This Dividend Stock Today’s chart highlights one of my favorite dividend stocks in the entire stock market: Automatic Data Processing (NASDAQ:ADP). ADP is a human capital management company headquartered in Roseland, New Jersey. If you look up.
This Beaten-Down Stock Provides an Oversized Yield In a bloated stock market, the highest-yielding names tend to be down-and-out tickers. This shouldn’t come as a surprise. A company’s dividend yield is calculated by dividing its annualized payout by its share.
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Want to Earn a Double-Digit Yield? Read This In this day and age, what could possibly be better than a stock offering a jaw-dropping dividend yield of 12.7%? Well, how about a 12.7% yielder that’s still raising its payout? Sound.
This Investment Has Crushed the Stock Market Since 1960 They don’t get much attention in the financial press and you don’t hear them mentioned often at cocktail parties. In fact, most people have never heard of them. In the past.
A Retail Stock for Income Investors to Consider When almost everyone thinks that the retail industry is done because more consumers are shopping online, one retail company just keeps on raising its payout to investors. I’m talking about Target Corporation.
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A Double-Digit Yielder Most People Have Never Heard of To most people, Monroe Capital Corp (NASDAQ:MRCC) won’t be a familiar name. As a business development company (BDC) headquartered in Chicago, Monroe Capital stock doesn’t really make headlines in the financial.