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.
RBC Stock: A Good Diversification From U.S. Banks Investors looking for diversification away from the scandal-plagued U.S. banking system should look north of the border to the U.S.’ next-door neighbor, where you can hardly find the level of mismanagement in.
Time for C Stock to Move Higher Citigroup Inc (NYSE:C) is a New-York based bank and one of the largest in the world. Looking at the stock charts over the past year, the stock is pretty much flat. But with.
WMT Stock: New Push to Capture E-Commerce Share Wal-Mart Stores, Inc. (NYSE:WMT) stock is again in the limelight. Bears are encircling Wal-Mart stock on speculations that the world’s largest retailer is failing to reform its brick-and-mortar model at a time.
Why AT&T Stock’s Winning Streak Could Continue Mega-cap companies aren’t known for producing capital gains, but if you invested in AT&T Inc. (NYSE:T) stock 12 months ago, you’d have enjoyed a return of 17.1%. You would have also collected quite.
Procter & Gamble Co: A Name to Own Forever? Procter & Gamble Co (NYSE:PG) is the ultimate “forever stock.” The company has been in business since 1837. Investors are earning a current shareholder yield of nine percent. It’s no wonder.
New Catalysts for GM Stock General Motors Company (NYSE:GM) is showing impressive growth in its business, but investors don’t seem to be impressed. In the past 12 months, GM stock returned a measly 2.7%. Of course, as income investors, we.
American Express Company Stock Gets Downgraded By Nomura Shares of credit card giant American Express Company (NYSE:AXP) stock fell four percent at the market open on Thursday after receiving a significant downgrade from Nomura Group. The analysts took down their.
More Upside for HD Stock? If you held Home Depot Inc (NYSE:HD) stock, you must be laughing all the way to the bank now. Over the past five years, the shares have returned 370% to shareholders. Home depot is not.
YUM Stock reported worse-than-expected sales results in a key growth market Shares of fast food giant Yum! Brands, Inc. (NYSE: YUM) stock dropped 2% in after-hours trading Wednesday, on top of a 2% decline during the regular trading session. Yum.
Apple Stock: Facing Direct Competition From Google Pixel Apple Inc. (NASDAQ:AAPL) is facing, for the first time, a real threat to its most profitable segment of its business, the “iPhone.” And that threat is coming from an unordinary rival; Google’s.