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.
11 Consecutive Years of Dividend Hikes It’s dividend season for American insurance companies, with several of them having raised their payout. This time, it’s American Financial Group Inc. (NYSE:AFG). On Wednesday, August 17, American Financial Group announced that its board.
Company Raises Quarterly Dividend Rate to $0.27 Per Share Regional banks can be solid picks for income investors, and one of them just proved this point by raising its dividend again. On Wednesday, August 17, Chemical Financial Corporation (NASDAQ:CHFC) announced.
UBS Strategist Names Top 20 Stocks Buying Back Shares As the stock market flirts with new all-time highs, analysts are wondering if the equities are about to hit a ceiling. Julian Emanuel, strategist for financial services company UBS, is one.
Bottom in Sight for Pipeline Stocks With the severe downturn in the energy sector, it’s not just drillers that are affected; midstream companies took a beating as well. But according to SunTrust Robinson Humphrey, there is still hope for midstream.
Moving Towards Quarterly Dividend Payments You might not have heard of this restaurant operator, but when it announces a double-digit dividend hike, it deserves some attention from income investors. On Wednesday, August 17, Meritage Hospitality Group Inc. (OTCMKTS:MHGU) announced that.
Company Announces 31% Increase in Quarterly Dividend Rate Insurance companies are known for delivering solid dividends. But a 31% boost in one’s quarterly dividend rate doesn’t happen that often. On Wednesday, August 17, First American Financial Corp. (NYSE:FAF) announced that.
Boulder Brands Acquisition Improving Cash Flows Pinnacle Foods Inc. (NYSE:PF) said its board has approved an increase of approximately 12% in the company’s quarterly cash dividend to $0.285 per share, from $0.255. The dividend will be payable with the third.
Brexit Fallout Starts to Show Just weeks after Brexit, new evidence has emerged suggesting that there is collateral damage from the Bank of England’s (BoE’s) insistence on low interest rates. The BoE slashed rates to near zero in an attempt.
Higher Gold Prices, Currency Help Miner Harmony Gold Mining Co. (ADR) (NYSE:HMY) declared a dividend for the financial year ended on June 30 for the first time in more than three years as the company has returned to profiting as.
Authorizes Buyback of Up to One Million Shares On Tuesday, August 16, Comfort Systems USA, Inc. (NYSE:FIX) announced that its board of directors has approved an amendment to its existing stock repurchase program. The amendment would increase the shares authorized.