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 Surprising Dividend Stock High yields and safety go together like teetotalers and alcoholics: they don’t hang out together often. You don’t need an MBA to find the problem with big payouts. In most cases, the distribution runs on borrowed.
Small Stock Pays Big Dividends This company has become an income machine for investors over the past three decades, thanks in large part to the 132 consecutive dividends it has paid. And most people have never heard of it. Yet.
Should Investors Consider This Ultra-High Yielder? In the investment world, markets can be efficient. This means that if something seems too good to be true, it probably is. Still, it’s hard to pass up the opportunity of owning a stock.
REIT With a Solid Yield If you want to make a lot of money over the next few years, you need to keep an eye on healthcare. Each day, 10,000 baby boomers turn 65. That means more aches, more pain,.
A Dividend Growth Stock Most People Have Never Heard Of In a volatile market, it would be awfully nice to have a dividend income stream that keeps on growing. What would be even better, though, is locking in that income.
PG Stock Hits All-Time High This past summer, when everyone clamored for cryptocurrencies and tech companies, I vowed to hang on to my stodgy dividend stocks. I’m glad I did. Jumping into each new fashion on Wall Street rarely pays.
If You Want to Lock in Dividend Growth, Read This One of the reasons I like dividend growth stocks is that they tend to outperform the market. And as it turns out, Automatic Data Processing (NASDAQ:ADP) just proved the point.
Did You Miss This Oversized Income Opportunity? It’s no secret that income investors have a special fondness for real estate stocks. Often structured as real estate investment trusts (REITs), these companies pass the rental income they earn from their real.
These Stocks Yield Up to 9% Investors face a lot of questions in 2019. “What if China sparks a trade war?” “What if the economy goes into a recession?” The one thing you can usually count on is dividends. Distributions.
The Most Overlooked Income Opportunity in Today’s Market? Among the rules of life, one is carved in stone: When you make money, part of it goes to taxes. Now there’s a way for income investors to make it even—by being.