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.
Higher Gold Prices Boost Cash Flows New York, NY — Newmont Mining Corp (NYSE:NEM), the world’s second largest gold miner by market value, may increase its quarterly dividend later this year as bullion prices jump. “It’s certainly worth noting that.
GE Capital’s Exit Gives Flexibility New York, NY — General Electric Company (NYSE:GE) plans to return $26.0 billion to investors through buybacks and dividends as the company focuses on its industrial businesses and exits from financial segments. The GE Capital.
Husky Shares Rise 2% Before Earnings Release New York, NY—Husky Energy Inc. (TSE:HSE) surged two percent today amid speculations that the Calgary-based integrated oil and gas producer may resume its dividend later this year and might offload $200 million worth.
Karowe Mine Continues to Generate Cash New York, NY—Lucara Diamond Corp (TSE:LUC) will pay CA$0.45 per share as a special dividend to holders of its common shares. The special dividend will be paid in addition to the company’s existing 2016.
AltaGas Bumps Dividend 6% New York, NY — Altagas Ltd (TSE:ALA) shares surged after the energy infrastructure company increased its dividend payout by six percent. After today’s dividend announcement, the company’s dividend payout rose by $0.01 per share per month.
No Dividend Hike Coming for Kinder Morgan Shareholders New York, NY — Kinder Morgan Inc (NYSE:KMI) shares plunged after the energy infrastructure company in North America disappointed investors who were expecting a higher dividend this year as the company tries.
Assets Under Custody Up 3% New York, NY — Northern Trust Corporation (NASDAQ:NTRS) said it would raise its quarterly cash dividend to $0.38 per share, up from $0.36 per share, as the Chicago-based firm reported a three percent increase in.
Morgan Stanley Hikes Dividend by 33% New York, NY — Morgan Stanley (NYSE:MS) said its second-quarter profit fell when compared to the similar period last year, but its earnings beat analysts’ expectations on strong performance by its investment banking unit.
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.