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.
Sometimes, the market makes things easy for us. After a somewhat sluggish 2016, Procter & Gamble Co (NYSE:PG) stock is on a nice little run of late, up more than four percent year-to-date and about 11% above from its 52-week.
Big Upside in Macy’s Stock? If a retail company can’t grow its sales even in the holiday season, it’s probably not going to be a stock market favorite. Macy’s Inc (NYSE:M) stock has been the latest example. But does that.
It’s never a good idea to stereotype, even when it comes to stocks. Income investors, for example, might have completely ignored Starbucks Corporation (NASDAQ:SBUX) over the years due to the largely held belief that it remains a trendy, high-multiple-growth play.
Tech stocks aren’t known for big yields, but Microsoft Corporation (NASDAQ:MSFT) could be an exception. “Windows” has become the ultimate cash cow, spinning out huge profits. In recent years, this has allowed Microsoft to become a tidy dividend stock, with.
Is There Any Upside in Disney Stock? Walt Disney Co (NYSE:DIS) stock hasn’t really been known as an income investors’ favorite. The company pays dividends semiannually rather than quarterly, and at 1.43%, Disney stock’s dividend yield is nothing to brag.
No business is immune to disruption—not even one that has sold syrupy soft drinks since 1892. Often the bedrock of conservative dividend portfolios, The Coca-Cola Co (NYSE:KO) stock is down about 15% from its 52-week highs amid slumping revenue and.
Never lose interest in a stock simply because of a low dividend yield. For instance, it would’ve been pretty easy for income investors to pass on Visa Inc (NYSE:V) stock and its regularly paltry sub-one-percent dividend yield in recent years..
Income Investors Should Consider Verizon Stock Sometimes, high dividend yields come from subdued stock prices. And that could be the case for Verizon Communications Inc. (NYSE:VZ) stock right now. Verizon stock returned a disappointing negative 2.3% in the past 12.
Apple Stock is a Top Pick for Income Investors Recently, Apple Inc. (NASDAQ:AAPL) stock investors have been handsomely rewarded. In the past 12 months, shares of Apple stock surged 40%. Not bad for the biggest company in the world, with.
Income Investors Should Consider MSFT Stock Tech stocks can be risky, but that shouldn’t prevent income investors from considering Microsoft Corporation (NASDAQ:MSFT) stock. To see just how things can get absurd in the tech sector, here’s a fact: despite the.