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.
An Oversized Monthly Income Stream to Consider To be honest, when I first came across Great Elm Capital Corp (NASDAQ:GECC), my reaction was likely just like yours: “Is this too good to be true?” Great Elm is a business development.
Subscribers Had a Chance to Earn 124% Gain on This Income Investment Today’s chart highlights one of my favorite types of income investments. I have previously discussed the term “ROCKs,” an acronym I coined to describe the most profitable type.
TerraForm Power Inc’s Dividend Payout Poised for a Rebound We all love a comeback story. Steve Jobs. Tiger Woods. Mario Lemieux. These episodes tug at our heartstrings and make us believe anything is possible. The same applies to the stock.
A Double-Digit Yielder to Think About In this day and age, companies usually have a set of expectations to beat in earnings season: revenue and profit. Every three months, Wall Street analysts will form their top- and bottom-line estimates, and.
P&G Stock Up 42% in 12 Months, With More Upside Coming Last year, when Wall Street had given up on Procter & Gamble Co (NYSE:PG) following a series of poor financial results, I vowed to stand behind the consumer staples.
This Bank Stock Deserves a Look Seeing what happened during the last financial crisis, income investors know that even the largest banks—many of which have more than a century of operating history—are not exactly bulletproof. For instance, in the U.S.,.
Monthly Dividend Stocks for Steady Retirement Income Dividend stocks come with one big problem for those looking for retirement income: infrequent distributions. I love collecting payments from wonderful businesses. But for those of us who are in or approaching retirement,.
A High-Yield Stock to Think About As I’ve said plenty of times, ultra-high-yield stocks are usually not the safest bets. In this day and age, it’s not uncommon for investors to get into a high-yield stock, only to find out.
Cost Cutting Sends CSX Corporation to Record Highs If you want to make more money in the stock market, it pays to invest in something fresh. My first boss, a grizzled 65-year-old broker, would often say, “Out with the old,.
Time to Check Out This REIT Real estate investment trusts (REITs) have been a staple for many income investors. And it shouldn’t come as a surprise: collecting rent is literally a centuries-old business and has been proven to generate a.