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.
Company Struggles to Preserve Cash New York, NY — Investors are anxiously waiting to see whether Telefonica S.A. (ADR) (NYSE:TEF) will cut its dividend payout as the heavily indebted Spanish phone operator struggles to preserve cash after its plan to.
New York, NY — Regional banks might be small, but they can still provide big returns. On Tuesday, Mercantile Bank Corp. (NASDAQ:MBWM) announced that its board of directors declared a dividend of $0.17 per share. This represents a six percent.
New York, NY — On Tuesday, the board of directors of Ally Financial Inc (NYSE:ALLY) declared a quarterly dividend of $0.08 per share. This would be Ally’s first dividend since the company’s initial public offering in 2014. The dividend will.
New York, NY — Environmentalists seem to be winning big time in politics, but this environmental consulting firm just cut its payout to shareholders. On Monday, the board of directors of Ecology and Environment (NASDAQ:EEI) declared a six-month dividend of.
JNJ Stock Raises Forecast for Full Year New York, NY — Healthcare giant Johnson & Johnson (NYSE:JNJ) reported a better-than-expected rise in quarterly sales, helped by strength in its pharmaceuticals business. Johnson & Johnson raised its 2016 sales and earnings.
Second-Quarter Profit Grew 74% New York, NY — Goldman Sachs Group Inc (NYSE:GS) reported a 74% jump in its second-quarter profit as fixed-income revenue rose and compensation costs fell. Goldman Sachs’s board of directors declared a dividend of $0.65 per.
New York, NY — In today’s economy, brokerage and banking companies aren’t really the fastest growing. This one company, however, just reported record net income. On Monday, the Charles Schwab Corp (NYSE:SCHW) announced financial results for the second quarter of.
New York, NY — Hardwood lumber distribution doesn’t sound like an exciting business, but a sizable dividend hike from this company should get some attention from income investors. On Monday, July 18, Hardwoods Distribution Inc (TSE:HWD) announced that it has.
New York, NY — For the 12th year in a row, Ryder System Inc. (NYSE:R) has elected to slightly raise its dividend. The company declared a payout of $0.44 per share, to be paid on September 16 to stockholders of.
College housing can be fun, even for your retirement. Of course, I’m talking about investing in real estate investment trusts (REITs) that own collegiate housing. On Friday, Education Realty Trust, Inc.’s (NYSE:EDR) board of directors approved a quarterly dividend of.