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.
A Top Dividend Stock to Think About “Given the company’s well-covered dividends and decent 3.6% yield, this could be an opportunity for income investors to pick up a solid dividend stock on the cheap.” That’s what I told readers of.
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Looking for Oversized Yield? Read This Even though the stock market seems to be overly euphoric—which is not exactly a good thing for value-conscious income investors—there are plenty of under-the-radar tickers that provide extremely generous dividends. Crescent Capital BDC Inc.
Spark Energy Stock’s Dividend Is Safe & Reliable Admittedly, utility stocks might be boring, but “boring” can provide investors with a big, reliable income stream—which makes up for the lack of pizzaz. And that’s exactly what Spark Energy Inc (NASDAQ:SPKE).
Why This Overlooked Tech Giant Could Be an Opportunity The market hasn’t been very income-investor-friendly for a quite a while. Due to the Federal Reserve’s low-interest-rate policy after the Great Recession, fixed income products haven’t yielded much in the past.
CrossAmerica Partners Stock Is a High-Yield Stock Worth Watching If you’re tired of forking out huge sums of money for gas when you pull up to the pumps, you might want to consider getting the oil and gas companies to.
Don’t Ignore The Massive Income Potential of DKL Stock Delek Logistics Partners LP (NYSE:DKL) is the kind of supersized high-yield stock that investors should look at right now. Yes, the stock market is trading at record levels, but thanks to.
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