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.
Kohl’s Stock Pays a Very Nice Dividend Kohl’s Corporation (NYSE:KSS) stock presents income investors with some really interesting opportunities because of its high dividend yield and ability to make money in the department store business. Kohl’s stock reported a dividend.
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The Toy Business and MAT Stock Mattel, Inc. (NASDAQ:MAT) is the world’s largest designer and marketer of toys that is best known for its “Barbie,” “Hot Wheels,” and “Fisher-Price” products lines. But the best thing Mattel makes for income investors.
XOM Stock: Solid History of Dividend Payouts The biggest worry for investors in the oil patch these days is whether energy companies will be able to continue paying dividends as they await a recovery in oil prices. In this challenging.
PG Stock Pays Secret 9.4% Yield You might not realize it, but Procter & Gamble Co (NYSE:PG) stock gushes income. PG stock pays a “hidden” 9.4% yield. However, you won’t see this payout listed on Yahoo! Finance. You certainly won’t.
Are the Bears Wrong on Apple Stock? Apple Inc. (NASDAQ:AAPL) stock is on the rise. In the past three months alone, it returned nearly 20%, adding approximately $100.0 billion to Apple stock’s market cap. But looking bit further back, you.
JPM Stock: Good for Current Income and Dividend Growth JPMorgan Chase & Co. (NYSE:JPM) is the biggest bank stock in the U.S. by total assets and is a perfect example of a best-in-class bank stock. JPM stock enjoys strong fundamentals.
CAT Stock: Analysts Seeing a Bottom in Commodity Downturn It’s tough to find a business in the resource sector which is performing well in this commodity downturn. However, if you’re looking for the first sign of a bottoming of the.