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.
ADP Stock Deserves Income Investors’ Attention In the world of dividend stocks, there is an elite group called the Dividend Kings. By definition, a Dividend King is a company that has raised its dividend every year for at least 50.
Another High-Yield Stock to Think About With an unexpected 50-basis-point interest rate cut from the U.S. Federal Reserve, it’s safe to say that, in the near future, Americans won’t be getting much return from their savings accounts. And that’s why.
Alamos Is Returning Cash to Investors For the most part, income investors aren’t really known for being fond of gold. The reason is simple: on its own, the yellow metal does not pay any interest or dividend. However, gold mining.
Three Top Dividend Stocks to Consider After the Crash Stocks have plunged, but you probably don’t need a reminder. Why they’ve plunged matters. And while you can point to many reasons for the panic (not all of them rational), a.
This High-Yield Stock Looks Interesting Income investors and contrarian investors don’t cross paths very often. One group looks for steady income while the other group deliberately goes against a prevailing market trend and needs the trend to reverse in order.
This Dividend Stock Deserves a Look In an era when digital advertising can target audiences quite precisely, billboard ads may not seem that attractive to marketers. Yet one company that’s known for its billboard assets just delivered some good news.
A High-Yield Stock to Think About If you think a 10% yield is too good to be true in today’s stock market, then what Delek Logistics Partners LP (NYSE:DKL) is offering right now just might make your jaw drop. Headquartered.
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.