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.
Can You Trust Main Street Capital’s Payout? It’s the triple crown of income investing. A big yield, solid fundamentals, and solid cash flow; it’s no wonder that Main Street Capital Corporation (NYSE:MAIN) has emerged as a favorite among income investors..
GD Stock: Another Top Dividend Stock In the stock market, there’s an elite group of dividend-paying companies known as the S&P 500 Dividend Aristocrats. To become a Dividend Aristocrat, a company must be a member of the S&P 500 Index.
What to Look for in Retirement Stocks With a huge market sell-off still in the rearview mirror, investors have been wondering whether 2019 will be a rough year for stocks. If you’re a retirement investor, you should be extra careful.
Dividend Stock Now Pays 4.2% December 11 will go down as a forgettable day for investors. The Dow Jones, reeling from a two-week slide, shredded over 600 points by the middle of the trading session. But one small group of.
Dividend Stocks with Growth How do you build a baseball dynasty? Anyone can pick today’s current all-stars, but they come with a price tag to match. The trick comes down to spotting the next crop of top players and signing.
MRCC Stock: Consider This High Yield The past several years haven’t been the nicest to income investors. The most solid dividend-paying companies were already expensive. That means they don’t offer much in terms of yield, while the high-yield stocks weren’t.
Tiny Stock Pays Big Yields Last month, I told you about the little-known dividend stocks that would beat the market this year, and likely for many years to come. These firms don’t have the size and reputation of their larger.
If You Want to Earn a Double-Digit Yield, Read This Risk-averse investors tend to stay away from ultra-high-yielding stocks, but you might want to make an exception for this one. I’m talking about Alliance Resource Partners, L.P. (NASDAQ:ARLP), a master.
An Income Stock You Can Count On Quality stocks seldom go on sale, especially when they also pay a dividend. But with the recent market sell-off, even some of the most solid dividend payers have been put in the penalty.
NKE Stock: Just Do It? The best things sometimes come in small packages. You could say that the same thing applies to dividend investing. Consider Nike Inc (NYSE:NKE). Over the past decade, the yield on shares has averaged less than.