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 Has Great Potential on Internet Turnaround Income investors in Wal-Mart Stores, Inc. (NYSE:WMT) stock may have seen the worst of its performance after the company fell from grace last year after announcing its first-ever decline in sales. Investors.
New Business Model Turning Microsoft Stock into Dividend Machine Technology investors today seem to prefer Internet stocks to the decades-old Microsoft Corporation (NASDAQ:MSFT) stock. I mean, who cares about Microsoft stock—a $450.0 billion market cap behemoth—when there are Internet companies.
Nike Stock is Returning Value to Shareholders As an income investor, you probably haven’t paid that much attention to Nike, Inc. (NYSE:NKE) stock. With an annual dividend yield of 1.11%, Nike stock isn’t exactly the one you use to build.
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Intel Stock Could Be a Long-Term Bet Intel Corporation (NASDAQ:INTC) stock is not exactly a hot commodity in today’s tech sector. When you can make double- or even triple-digit returns by trading some high-momentum Internet names, who cares about Intel.
REIT Yields 3x More Than Dividend Stocks Like dividend stocks, real estate can be a great source of income. Each month, your tenants pay you rent and your property values go up. No wonder more money has been made in.
Latest Deals May Fuel More Gains in VZ Stock Verizon Communications Inc. (NYSE:VZ) has been a great growth and dividend story so far this year. And I hope you’ve not missed that one! Verizon’s stock handed in a decent 13%.
Canadian Lender Beats Profit Forecast The Bank of Nova Scotia (TSE:BNS) is the latest Canadian bank to hike its dividend after reporting another round of strong profits. After posting a six-percent increase in its fourth-quarter earnings, Canada’s third-largest lender by.
7 Best Companies to Earn Monthly Dividends One of the main motivations for income investors is to earn monthly dividends by investing in companies which provide a stable and predictable dividend income. Buying monthly dividend stocks rather than quarterly paying.