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.
Industrial Firm Concludes Strategic Review of Business New York, NY —Badger Meter Inc. (NYSE:BMI) said it was increasing its cash dividend payout by 15% and raising the number of shares outstanding through a two-for-one stock split after the industrial flow.
Coating Company’s Shares Have Surged 16% in 3 Months New York, NY — Nordson Corp. (NASDAQ:NDSN) announced today that its board has approved a 13% increase in its quarterly cash dividends, going from $0.24 per share to $0.27 per share..
SeaWorld Stock Down 28% in Past Three Months New York, NY — SeaWorld Entertainment Inc. (NYSE:SEAS) was upgraded to neutral from underperform at Credit Suisse on expectations that the company will cut its dividend and use the money for growth..
Shares Plunge 30% as Drugmaker Lowers 2016 Guidance New York, NY —Concordia International Corp. (NASDAQ:CXRX) (TSX:CXR), a Canadian drugmaker, suspended its dividend payout today following its disappointing second-quarter results, saying that it will focus on growth and debt reduction going.
New York, NY — Newmont Mining Corp (NYSE: NEM) may double its third-quarter dividend payout to $0.05 a share if the gold prices continue to trade higher, according to Chief Executive Officer Gary Goldberg. “We’ll look at modifying our gold-price-linked.
Potential for a 5% Dividend Yield New York, NY — The automotive sector is not really the hottest place in the stock market these days, but some of them still offer handsome dividends. In fact, one analyst just said that.
33% Increase in Annual Dividend Rate New York, NY—Radio broadcasting companies are not exactly known as go-to investments for income investors. But this one just announced a double-digit increase in dividends. On Thursday, August 11, Newfoundland Capital Corporation (TSE:NCC.A, NCC.B).
Many Companies Borrowing from Bond Market New York, NY — An increasing number of companies listed on the S&P 500 are borrowing from the bond market to fund their share buyback programs, a research Bloomberg News shows. “It tells a.
Announces Fully Franked Final Dividend of $0.155 Per Share New York, NY—You might not have used its service, but this Australian telecom giant deserves the attention of income investors. On Thursday, August 11, the Board of Directors of Telstra Corporation.
Board Also Approves $10.0 Million Share Buyback Plan New York, NY — Haverty Furniture Companies, Inc. (NYSE:HVT) said its board of directors has approved a $0.12 a share dividend on the common stock, representing a 20% increase when compared to.