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.
Don’t Ignore This Beaten-Down Stock If you’ve been following the markets, you’d know that, these days, investors are willing to pay a premium for companies that can maintain and grow their dividends. The reason is simple: the COVID-19 pandemic has.
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These Special Dividends Pay Investors Yields up to 42% July 29, 2020 will go down as a forgettable day for most investors. Stocks trading back and forth during the session as investors weighed the impacts of a slowing U.S. economy,.
Searching for Oversized Yield? Read this Beaten-down stocks are usually not perfect, but some of them are still worth a look, especially for those who want to earn oversized yield. Global Partners LP (NYSE:GLP), for instance. GLP stock is trading.