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.
Varying Payouts While you may not own Seagate Technology PLC (NASDAQ: STX) stock, you may very well use a piece of Seagate hardware. Known primarily for its line of hard drives, Seagate’s stock boasts a dividend of $0.63 per share.
Sources: Viacom Stock Could Cut Dividend by 50% With a 4.34% annual yield, Viacom, Inc. (NASDAQ:VIAB) stock looks like a solid dividend pick. But according to sources, Viacom stock could soon reduce its quarterly payout by as much as 50%..
PM Stock: 5% Dividend Increase Possible Philip Morris International Inc. (NYSE:PM) stock may get a major boost from a possible five percent dividend increase as soon as this week, according to a Wells Fargo & Co. analyst forecast. In a.
WST Stock: Board Approves 8.3% Dividend Hike West Pharmaceutical Services, Inc. (NYSE:WST) said its board of directors has approved an 8.3% increase in its fourth-quarter dividend payment to shareholders. After the increase, investors in WST stock will receive dividend of .
POT Stock Investors May See Jump in Dividend Today, Potash Corporation of Saskatchewan Inc.‘s (TSE:POT) announced plans to merge their operations with Agrium Inc. (TSE:AGU) in a deal that would create a global agricultural giant with an enterprise value of .
Wal-Mart Stock: 42 Consecutive Years of Dividend Hikes For decades, Wal-Mart Stores, Inc. (NYSE:WMT) stock has been a staple for many dividend investors. More recently though, there have been some concerns. The biggest worry is this: what would be left.
AT&T Stock Benefiting From Successful Integration AT&T Inc. (NYSE:T) is a rock-solid dividend stock with 31 years of dividend payment history. When looking for a stock that not only sends its investors a dividend check, but also offers them the.
5 Distribution Hikes in Less than 2 Years For income investors, few things are better than a steadily growing stream of distributions. However, they are not always easy to find. Fortunately, there is one midstream partnership providing just that: Rice.
XOM Stock Performing Well Amid Commodity Rout ExxonMobil Corporation (NYSE:XOM) has a history of providing consistent dividends to its shareholders for the past 34 years. On average, Exxon Mobil stock has delivered 6.4% annualized increases in dividend payments to investors.
Potential Hike Incoming International Paper Company (NYSE:IP) stock has increased its dividend consecutively in the last four years and it is on the verge of announcing another dividend hike for 2016. A strong free cash flow generation profile and conservative.