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.
Authorizes Buyback of 500,000 Shares Over the Next 12 Months In the eyes of investors, IT companies might not be as hot as they used to be, but one of them is still returning value to shareholders through aggressive buybacks..
Brinker’s Yield Now Over 2.5% The restaurant business can be lucrative, as proven by a Dallas, Texas-based multinational restaurant chain having raised its dividend again. On Thursday, August 18, Brinker International, Inc. (NYSE:EAT) announced that its board of directors has.
Shares Surge After Better-Than-Expected Earnings Community Bank System, Inc. (NYSE:CBU) said its board has approved a 3.2% increase in its quarterly cash dividend payout to shareholders on its common stocks, reflecting the strength of the bank’s capital position. Community Bank.
Major Upside for Two MLPs, Analyst Energy companies aren’t exactly the hottest picks in the stock market these days, but master limited partnerships, or MLPs, that are linked to oil majors can still do well, according to investment bank Stifel.
Debt Investors Shifting Money to Dividend Stocks New York, NY — Yield-hungry debt investors shouldn’t blindly buy dividend stocks with high valuations. Investors are diverting cash to equity markets as they look for returns amid negative yields in most of.
Analyst Raises Price Target on Kinder Morgan Stock to $24.00 After a huge drop last year, Kinder Morgan, Inc. (NYSE:KMI) stock has climbed quite a bit in 2016. Now, a major Wall Street firm is saying that there is more.
Increases Quarterly Dividend Rate to $0.11 Per Share Some small banks can pay big dividends. United Bancorp, Inc. (NASDAQ:UBCP) is the latest example. On, August 18, United Bancorp announced that its board of directors has approved a quarterly cash dividend.
Authorizes an Additional $10.0 Million in Stock Buybacks On, August 17, Aegion Corporation (NASDAQ:AEGN) announced that its board of directors has authorized a new share repurchase program. Via this program, the company will be able to repurchase up to $10.0.
Shares Tumble 6% After Cost-Cutting Measures Announced New York, NY — Communications Systems, Inc. (NASDAQ:JCS) (CSI) slashed its quarterly dividend by 75%, as the global provider of physical connectivity infrastructure and services says it is taking steps to reduce cost..
15% Increase in Quarterly Dividend Rate Just before being acquired, ITC Holdings Corp. (NYSE:ITC) decided to reward shareholders with one more dividend hike. On Wednesday, August 17, ITC Holdings announced that its board of directors has approved a quarterly cash.