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.
Halifax-Based Investment Firm Swings to Profit New York, NY — Clarke Inc. (TSE:CKI) said it is ceasing the company’s regular dividend payout because its internally generated cash flow has been insufficient to fully finance recent dividend payments as a result.
Strong Subscriber growth in Wireless Helping New York, NY — TELUS Corporation (TSE:T), one of Canada’s big three telecommunications companies, posted better-than-expected earnings and said it’ll boost its quarterly dividend to CA$0.46 per share, an increase of $0.04 from last.
This MLP Now Yields 6.7% New York, NY — Energy partnerships can do well even when oil prices are down. Buckeye Partners, L.P. (NYSE:BPL) just proved this point again. On Friday, Buckeye announced that its general partner declared a cash.
Growth Strategy Generating Significant Cash New York, NY — Sonic Corporation (NASDAQ:SONC), the nation’s largest chain of drive-in restaurants, said its board has approved a 27% increase today in dividend payout beginning in the first quarter of the fiscal 2017..
Carlisle Marks 40 Consecutive Years of Dividend Increases A company making rubber sheet roofing might not sound that exciting. But this one has been raising its dividends every single year for the past four decades. On Thursday, the board of.
Deutsche Predicts 20% Upside New York, NY — Kraft Heinz Co (NASDAQ:KHC) said today its board approved a 4.3% increase in the company’s quarterly dividend to $0.60 per share of common stock. In addition, the company reported earnings of $0.85.
Underwriting Business Boosts Profits New York, NY — National General Holdings Corp (NASDAQ:NGHC) announced today that its board approved a 33% increase in its quarterly dividend to $0.04 per share for its common stock-holders, according to a statement released today..
Investment Bank’s Shares Surge 9% After Dividend Bump New York, NY — Moelis & Co (NYSE:MC) increased its quarterly dividend by seven percent to $0.32 per share, representing the third increase in its regular dividend from the time of the.
Fresh-Cut, Avocado Product Lines Experiencing Growth New York, NY — Fresh Del Monte Produce Inc (NYSE:FDP) said its board has approved to raise its quarterly cash dividend by 17% to $0.15 per share as a result of its continued strong.
REIT Raises Dividend 8.4% New York, NY — Economic recovery might be slow in Las Vegas, but one casino resort-focused real estate investment trust (REIT) is hiking dividends just a few months after its initial public offering (IPO). On Thursday,.