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.
Johnson & Johnson Stock: A Blue-Chip Industry Giant There are few stocks that can match Johnson & Johnson (NYSE: JNJ); it is quite simply the gold standard for dividend stocks. It offers virtually everything an income investor would want. Not.
XRX Stock Business Units Xerox Corp (NYSE:XRX) is a 109-year old company whose name is synonymous with photocopying, receiving credit for inventing the photocopier and laser printer and popularizing the fax machine. The company pays a dividend of $0.38, which.
Solid Results for TGT Stock in a Difficult Climate Target Corporation (NYSE:TGT) stock has seen its share price decline by 14% over the past year. In the process, it has significantly underperformed its main rival, Wal-Mart Stores, Inc. (NYSE:WMT), which.
Why PG Stock is Still a Top Dividend Pick There is a simple reason why income investors should pay attention to Procter & Gamble Co (NYSE:PG) stock: dividends. There are companies with higher yields, but few of them can match.
MCD Stock: Turnaround Plan Producing Positive Momentum If you’re thinking to sell McDonald’s Corporation (NYSE:MCD) stock due to recent underperformance, think twice before you make your move. McDonald’s earnings in recent quarters haven’t impressed investors much. Sales growth has fallen.
New Device to Prove Apple Stock Bears Wrong? Apple Inc. (NASDAQ:AAPL) stock bears often argue that the company has reached its peak and will only go downhill. Their argument is that other than the “iPhone,” Apple stock doesn’t have much.
CCL Stock: Strong Third-Quarter Results If you’ve ever taken a cruise, you may have sailed on one of Carnival Corp’s (NYSE:CCL) ships. If you’re looking for an investment rather than a cruise, Carnival stock may still be your choice. CCL.
YUM Stock: What You Need to Know Fast food might not be that healthy, but Yum! Brands, Inc. (NYSE:YUM) stock can still provide you with a healthy stream of income. For those not in the know, Yum! Brands is a.
NKE Stock Plunges After Earnings Nike Inc (NYSE:NKE) stock tumbled more than four percent in after-hours trading on Tuesday. Why? The company just reported earnings. On Tuesday, Nike reported financial results for the first quarter of its fiscal 2017 which.
NKE Stock Hammered After Earnings Shares of Nike Inc (NYSE:NKE) stock declined two percent in after-hours trading following the company’s fiscal 2017 first quarter earnings report. This came despite the fact that the athletic apparel giant beat the analyst forecasts.