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.
A High-Yield Stock You Likely Haven’t Considered Investing in high-growth industries can be exciting, albeit a bit risky. The good news is, rather than hoping for capital gains in the long run, investors can also use dividend-paying instruments to earn.
Can’t Pay $315,000 for a Class-A Share of Berkshire Hathaway Inc.? Then Consider This. I know from speaking with hundreds of investors that many of them struggle to save enough money to start buying stocks. You need a lot of.
Top Dividend Aristocrats to Consider After the Stock Market Plunge Investors have plowed billions of dollars into the stock market over the past year, betting on a robust economy and growing profits. Now Wall Street has to give that a.
HD Stock Could Be an Opportunity Today’s chart highlights a top dividend stock that just raised its payout again: Home Depot Inc (NYSE:HD). Home Depot is one of the largest home improvement retailers in the world. Known for its big-box.
Can You Trust Exxon Mobil Corporation’s Dividend Payout? Income investors have long prized Exxon Mobil Corporation (NYSE:XOM) for its dependable dividends. Now they might be giving that a rethink. Shares of the energy giant have struggled in recent years with.
A High-Yield Stock You Likely Haven’t Considered Even in today’s low-yield environment, there are dozens and dozens of ultra-high yielding stocks trading in the market. But most income investors tend to stay away from them for the simple reason that.
Stock Market News Even though the next big drop seems to be on the horizon for the U.S. stock market, this earnings season has mostly been a good one. As of February 21, 87% of companies in the S&P 500.
Iron Mountain Stock Could Deliver Big Returns Just over two months into the New Year and some companies have already delivered serious returns to investors. Check out Iron Mountain Inc (NYSE:IRM), a storage and information management services company headquartered in.
T. Rowe Price Group Inc Delivers Pay Raise to Shareholders Investors have soured on T. Rowe Price Group Inc (NASDAQ:TROW) in recent years. But now Wall Street is giving that a rethink. Since the start of February 2019, shares of.
Another High-Yield Stock to Think About To most people, the name Prospect Capital Corporation (NASDAQ:PSEC) probably doesn’t ring a bell. But if you are looking for oversized dividends, this company—which belongs to a group that I call “alternative banks”—just might.