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.
Select Income REIT Hikes Distribution
Real estate investment trusts (REITs) aren’t known for their fast dividend growth, but one company seems to be proving the skeptics wrong. On Monday, Select Income REIT (NASDAQ:SIR) announced a quarterly cash distribution of $0.51 per common share. This represents.
Cummins Inc. Bumps Quarterly Dividend 5.1%
New York, NY — For the seventh year in a row, Cummins Inc. (NYSE:CMI) has elected to slightly raise its quarterly dividend. On Tuesday, the Columbus-based engine maker declared a payout of $1.025 per share, to be paid on September.
Healthcare Services Group, Inc. Reports Earnings, Hikes Dividend
Housekeeping may not be the sexiest business in the world, but it has been a profitable formula for investors. On Tuesday, Healthcare Services Group, Inc. (NASDAQ:HCSG) stock announced a quarterly dividend of $0.18375 per common share, representing a 0.7% increase.
Plains All American Pipeline, L.P. Announces Distribution Cut
Energy partnerships could be great picks for income investors. Unfortunately, not all of them are going through sunshine and rainbows these days. For example, one of them just announced a distribution cut. On Monday, July 11, Plains All American Pipeline,.
Moody’s: Canadian Banks Could Be Forced to Cut Dividends
Low oil prices could force Canada’s big banks to slash their dividends, according to the latest report by Moody’s. On Monday, the investment ratings agency published a report analyzing the impact of a downturn in the oil and gas sector.
This Could Spark a Dividend Hike at Kinder Morgan Inc
Income investors were unimpressed when Kinder Morgan Inc (NYSE:KMI) cut its dividends last December. But now, there is a new deal that could boost the pipeline giant’s ability to restore its dividends. On Sunday, July 10, Kinder Morgan announced that.
Alimentation Couche-Tard Inc Reports Record Profits, Hikes Dividend
New York, NY — Convenience stores may not be the most exciting business in the world, but they have been a lucrative investment for shareholders. On Monday, Alimentation Couche-Tard Inc (TSE:ATD.B) declared a payout of $0.0775 per share, to be.
Duke Energy Corp Raises Quarterly Dividend by 3.6%
Utilities have a reputation for being stodgy investments that generate reliable income—but not much excitement. Duke Energy Corp (NYSE:DUK) stockholders might beg to differ. On Monday, the southeastern utility declared a quarterly cash dividend of $0.855 per share. The move.
Alimentation Couche-Tard Inc Hits Quarterly Dividend 15%
New York, NY — For the fifth year in a row, Alimentation Couche-Tard Inc (TSE:ATD.B) has elected to hike its dividend to shareholders. On Monday, the company declared a payout of $0.0775 per share, to be paid on August 4.
British Insurer Aviva Plc Aims to Increase Payout Ratio to 50%
Investors have soured on European stocks after the recent U.K. Brexit referendum, but one company is doing its best to impress investors. On Wednesday, Aviva Plc (NYSE:AV) announced plans to raise its dividend payout ratio to 50% by the end.