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.
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.
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Gasoline Engine Maker’s Quarterly Profit Falls New York, NY — Briggs & Stratton Corporation (NYSE:BGG) said its board has approved a four percent increase in its quarterly dividend, as the world’s largest producer of gasoline engines for outdoor power equipment.
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Company Raises Quarterly Dividend Rate to $0.27 Per Share Regional banks can be solid picks for income investors, and one of them just proved this point by raising its dividend again. On Wednesday, August 17, Chemical Financial Corporation (NASDAQ:CHFC) announced.
UBS Strategist Names Top 20 Stocks Buying Back Shares As the stock market flirts with new all-time highs, analysts are wondering if the equities are about to hit a ceiling. Julian Emanuel, strategist for financial services company UBS, is one.
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Moving Towards Quarterly Dividend Payments You might not have heard of this restaurant operator, but when it announces a double-digit dividend hike, it deserves some attention from income investors. On Wednesday, August 17, Meritage Hospitality Group Inc. (OTCMKTS:MHGU) announced that.
Company Announces 31% Increase in Quarterly Dividend Rate Insurance companies are known for delivering solid dividends. But a 31% boost in one’s quarterly dividend rate doesn’t happen that often. On Wednesday, August 17, First American Financial Corp. (NYSE:FAF) announced that.