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.
Weak Demand Hits Fertilizer Maker New York, NY — Potash Corporation of Saskatchewan Inc (TSE:POT) slashed its dividend by 60% to $0.60 a share as the fertilizer maker continues to struggle with weak demand. The Saskatoon-based company reduced its 2016.
Increase Comes Amid Declining Profit New York, NY — Marathon Petroleum Corp (NYSE:MPC) said it will raise its quarterly dividend by 12.5% to $0.36 a share from $0.32 a share. “This increase in our dividend represents a compound annual growth.
Toronto Publisher Struggles to Reduce Losses New York, NY — Torstar Corporation (TSE:TS.B), the Toronto Star’s parent company, said it plans to lower the dividend to CA$0.10 per share annually beginning in the third quarter after it reported an adjusted.
A manufacturer of home improvement products doesn’t sound that exciting, but when it announces an intention to increase dividends, it deserves some attention from income investors. On Tuesday, Masco Corp (NYSE:MAS) announced intent to increase its annual dividend to $0.40.
Private Equity Firm Faces Slowdown New York, NY — The Carlyle Group LP (NASDAQ:CG) reduced its quarterly dividend to $0.63 per unit in the second-quarter from $0.89 per unit after profits declined as its buyout funds’ growth slowed and its.
Second-Quarter Profit Matches Estimate New York, NY — Eli Lilly & Co (NYSE:LLY) promised to increase the company’s dividend after reporting second-quarter earnings that matched analysts’ estimate. Profit excluding some items totaled $0.86 per share, the company said July 26.
Board Approves $640 Million-Buyback Plan New York, NY — The board of directors of BB&T Corporation (NYSE:BBT) declared a quarterly common stock dividend increase today of $0.02 to $0.30 per share. The increase is consistent with BB&T’s capital plan the.
Lender Says Growth Outlook Strong New York, NY — Comerica Incorporated (NYSE:CMA) is increasing its quarterly cash dividend by 4.5% to $0.23 per share as the growth outlook brightens for the Dallas-based lender. The board also authorized an increase in.
Earnings Report Brightens Outlook New York, NY — Texas Instruments Incorporated (NASDAQ:TXN) may increase its dividend payout in September or October after the chipmaker announced better-than-expected earnings, according to an analyst at Bank of America Merrill Lynch. The shares of.
Company Benefits from Acquisition New York, NY — Reynolds American, Inc. (NYSE:RAI) said it’s increasing its quarterly dividend by 9.5% to $0.42 per share as sales climbed after the tobacco company benefited from last year’s acquisition of rival Lorillard LLC,.