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.
Don’t Miss Out on This High-Yield Dividend Stock Recent years haven’t been that great for income investors. Interest rates have been kept artificially low, and with an average dividend yield of around two percent, the stock market in general hasn’t.
GILD Stock Should Be Taken Seriously by Dividend Investors Gilead Sciences, Inc.(NASDAQ:GILD) stock is one that should be considered by income investors. The name of the company may not be familiar to income investors, and I don’t blame you for.
Upside for HD Stock? Home Depot Inc (NYSE:HD) stock shouldn’t be ignored by income and growth investors. The market leader in the home improvement retailing segment, Home Depot is shareholder-friendly, with the share price having returned 192% over the past.
Major Upside in Disney Stock? When a company is delivering double-digit earnings growth, you’d think that investors would be cheering for it. But that’s not the case for Walt Disney Co (NYSE:DIS) stock. Despite posting solid results, Disney stock tumbled.
Cyber Week Could Be Big for WMT Stock When you think of Cyber Monday, Wal-Mart Stores, Inc. (NYSE:WMT) probably isn’t the first store to come to mind. And for Walmart stock, Cyber Monday doesn’t really sound like that much of.
Upside for JPM Stock? JPMorgan Chase & Co. (NYSE:JPM) stock is one that has seen all-time highs since Donald Trump became President-Elect. JPM Stock is up 178% over the past years. Now the question to ask, as an investor: are.
DE Stock Up 11% Deere & Company (NYSE:DE) stock is up 11%, due to a fourth-quarter earnings beat. Deere reported earnings per share (EPS) of $0.90, which more than doubled analysts’ estimate of $0.36. The total sales revenue came in.
HP Stock Tumbles Despite Sales Growth While growing sales in what’s considered a slowing industry deserves some praise, but HP Inc (NYSE:HPQ) stock is still having a hard time finding an audience. HP reported earnings after the bell on Tuesday,.
Amazon Black Friday: Competition Heats Up As the competition for holiday spending intensifies, many retailers are offering online deals much earlier to grab the major market share of this growing pie. Take, for example, Amazon.com, Inc. (NASDAQ:AMZN). Amazon’s Black Friday.
For the most part, 2016 has been a good year for the U.S. stock market, with the S&P 500 climbing nearly eight percent. During this period, dividend investors have also been handsomely rewarded. Many dividend-paying stocks kept their track record.