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.
KO Stock No. 8 on List of Top Dividend Growth Names When I try to sell investors on the benefits of dividend growth investing, I like to point to The Coca-Cola Co (NYSE:KO) stock. Say you had bought 100 shares.
Why Wal-Mart Stock Should Be on Your Radar People don’t get too excited about shopping at Wal-Mart Stores, Inc. (NYSE:WMT). And owning Wal-Mart stock is not something to brag about; in the past 12 months, WMT stock climbed a measly.
Upside for GILD Stock Gilead Sciences, Inc. (NASDAQ:GILD) stock is a biopharmaceutical company that discovers, develops, and commercializes medicine. The name is not one commonly heard when thinking of income investing, but I would say this company is the new.
CVX Stock: Collect 4% Dividend Yield From This Top Oil Company When it comes to paying dividends, you can’t beat energy companies. Consider Chevron Corporation (NYSE:CVX) stock, which is yielding over four percent in an environment where oil prices remain.
TRI Stock: Offering a Decade of Value to Shareholders As a major news source, Thomson Reuters Corp (NYSE:TRI) exerts tremendous influence on how we view the world. As a transmitter of knowledge and information worldwide, the corporation has a presence.
Intel Stock: A Case for Bigger Dividend Payout Building It’s tough to ignore Intel Corporation (NASDAQ:INTC) stock these days. The stock recently touched a price point not seen since 2000, when the tech bubble had burst, taking with it many.
XOM Stock: Consistent Profits in an Uncertain Market Oil giant Exxon Mobil Corporation (NYSE:XOM), commonly referred to as ExxonMobil, is navigating itself through a very difficult climate. The steep decline in oil prices over the past year took a big.
ABBV Stock: Good Investment Opportunity for Income Investors AbbVie Inc (NYSE:ABBV) is best known as a global pharmaceuticals company and the name behind one of the world’s top-selling drugs, “Humira.” ABBV stock resulted from the split of Abbott Laboratories (NYSE:ABT).
Upside For MA Stock? Mastercard Inc (NYSE:MA) stock has a countless number of shareholders, with some being considered part of the exclusive club of the super wealthy. The list includes the likes of Warren Buffett, Steve Cohen, and Ken Griffin..
Microsoft Stock Pays Secret 5.7% Yield Income investors are no stranger to Microsoft Corporation (NASDAQ:MSFT) stock. In today’s ultra-low-interest-rate environment, the software giant’s 2.7% dividend yield certainly makes it attractive. But that’s not all; do you know that Microsoft stock.