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.
Wal-Mart Stock: 42 Consecutive Years of Dividend Hikes For decades, Wal-Mart Stores, Inc. (NYSE:WMT) stock has been a staple for many dividend investors. More recently though, there have been some concerns. The biggest worry is this: what would be left.
AT&T Stock Benefiting From Successful Integration AT&T Inc. (NYSE:T) is a rock-solid dividend stock with 31 years of dividend payment history. When looking for a stock that not only sends its investors a dividend check, but also offers them the.
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XOM Stock Performing Well Amid Commodity Rout ExxonMobil Corporation (NYSE:XOM) has a history of providing consistent dividends to its shareholders for the past 34 years. On average, Exxon Mobil stock has delivered 6.4% annualized increases in dividend payments to investors.
Potential Hike Incoming International Paper Company (NYSE:IP) stock has increased its dividend consecutively in the last four years and it is on the verge of announcing another dividend hike for 2016. A strong free cash flow generation profile and conservative.
Cummins Stock Performance Stellar in Spite of Falling Revenues Diesel engine maker Cummins Inc. (NYSE:CMI) stock is one of those really great income names that a lot of people ignore. The Ohio-based company delivered a dividend yield of 3.13% and.
Manulife Stock Under Pressure on Weak Profits Manulife Financial Corp. (TSE:MFC) may start buying back its shares as Canada’s largest insurer plans a “pause” in its acquisition activity. “Given that we’ve done most of the things that we want to.
VFC Stock’s Dividends Outshine Its Peers VF Corporation (NYSE:VFC) stock doesn’t get as much attention as its peers in the apparel and footwear industry, but that doesn’t mean you should ignore the company altogether. In fact, there are quite a.
Here’s Why Income Investors Should Watch Disney Stock The market has been rather harsh towards The Walt Disney Company (NYSE:DIS) stock towards the end of last year. Despite the company’s solid performance quarter after quarter, Disney stock has plunged more.
IBM Stock: Big Dividends From Big Blue International Business Machines Corporation (NYSE:IBM) stock had a solid run so far into 2016. Looking a bit further back, though, things were less pretty. Since its heyday in 2013, IBM stock has plunged.