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.
Also Announces a $336 Million Share Repurchase Program After more than seven years of dividend drought, this airline company finally started returning value to income investors. On Wednesday, Qantas Airways Limited’s (ASX:QAN) board of directors declared a fully franked final.
P/E Ratios for Consumer Staples at Multi-Year Highs Investors who are buying solid dividend-paying stocks in search of a return when bond yields are extremely low are running into the risk of artificially inflating the value of companies. According to.
Weak Oil Outlook May Hurt Dividends With soaring debt levels at some of the world’s largest oil companies, it will be prudent for investors to think about the sustainability of their dividend payouts when oil prices continue to remain depressed..
Business Development Company Now Yields Almost 10% Business might be slow in August as many people take their vacations. But according to a Wall Street investment bank, there is an “August Opportunity” for income investors. In a note to investors,.
Country’s Biggest Lender Posts Record Profit Royal Bank of Canada’s (NYSE:RY)(TSE:RY) board of directors has approved a two-percent increase in its quarterly dividend payout. After today’s increase in dividend, the shareholders will receive a CA$0.83 dividend, payable on and after.
AerCap Authorizes $250 Million in Stock Buybacks AerCap Holdings N.V. (NYSE: AER) announced on Monday that its board of directors has given the go-ahead for a new $250.0 million share repurchase program. The program will run through to December 31,.
14% Hike in Quarterly Dividend Rate First Connecticut Bancorp, Inc.’s (NASDAQ:FBNK) board of directors has approved a quarterly dividend of $0.08 per share on Tuesday. This represents a 14.3% increase from the company’s current quarterly payout of $0.07 per share..
Slowdown in Payouts Result of Fewer Shareholding Is Wal-Mart Stores, Inc.’s (NYSE:WMT) dominant position in the elite “dividend aristocrats” club of the S&P 500 under threat? After maintaining a track record of increasing dividend payouts each quarter for many decades,.
Price Target Raised to $28.00 Fertilizer producers can not only help grow crops, but also grow your investment income. One of them just got upgraded by a major financial firm. On Tuesday, UBS Group AG (NYSE:UBS) upgraded CF Industries Holdings,.
Prison Operator to Lose Government Contract Corrections Corporation of America (CCA)(NYSE: CXW) may face a cash flow crunch if it continues to pay dividends to its shareholders after the indication of reduced business from the Federal Bureau of Prisons (BOP).