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.
WMB Stock Gushes Income T. Boone Pickens is one of the smartest energy investors on the planet. The oil tycoon started out as a wildcatter (a person who drills wildcat wells) in the 1950s. He built a sprawling business empire.
Is This 11.7% Yield Safe? You can make a lot more money investing in “pick-and-shovel” businesses than betting on a booming industry itself. Pick-and-shovel firms provide tools and services to a thriving sector, rather than betting everything on a single.
Out-of-Favor Stock Offers a Big Payout If you want to earn a double-digit yield in this day and age, you might have to dig into the beaten-down tickers in the market. Because dividend yield moves inversely to a company’s share.
KIM Stock: A High-Yield Stock Well Above the Average Yield It’s no secret that large, established companies can pay durable dividends. But because of their popularity, investors have already bid up their share prices. And that has caused their yields.
This Stock Market Investment Now Pays Up to 15% You have to dig deeper to earn decent stock market income nowadays. Thanks to the Federal Reserve, retirees have a tough time finding yield. But due to a glitch in the.
This Income Stock Could Provide Huge Returns When investors put their money in monthly dividend stocks, they are most likely looking for income. And indeed, by mailing out dividend checks more frequently, monthly dividend companies have made lives much easier.
Why Income Investors Should Take a Look at Small-Cap Dividend Stocks When you utter the words “dividend stocks,” most people will be thinking of established dividend payers like Walmart Inc (NYSE:WMT) and The Coca-Cola Co (NYSE:KO). Indeed, these companies have.
Fortis Inc. Gushes Dividends In business, beating the competition makes for great headlines. But if you want to make real money, it’s far easier to own a monopoly. For proof, you only need to take a quick glance through the.
Is This Double-Digit Yield Too Good to Be True? In recent years, income investors didn’t really have much of a choice. You either had to go with a blue-chip stock with a low dividend yield or a high-yield stock that.
Is This Dividend Yield Safe? I tend to avoid most high-yield stocks. In fact, most of the big payout names that cross my desk get tossed in the trash. You just don’t often see safety and high yields get mentioned.