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.
Kinder Morgan Disappoints on Dividend
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.
Northern Trust Raises Dividend by 6%
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 Profits Beat Expectations, Hikes Dividend
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.
Traders Betting Telefonica S.A. Won’t Cut Dividend
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.
Mercantile Bank Corp. Hikes Dividend 6%
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.
Ally Financial Inc Announces First Ever Dividend
New York, NY — On Tuesday, the board of directors of Ally Financial Inc (NYSE:ALLY) declared a quarterly dividend of $0.08 per share. This would be Ally’s first dividend since the company’s initial public offering in 2014. The dividend will.
Ecology and Environment Slashes Dividend by 16.7%
New York, NY — Environmentalists seem to be winning big time in politics, but this environmental consulting firm just cut its payout to shareholders. On Monday, the board of directors of Ecology and Environment (NASDAQ:EEI) declared a six-month dividend of.
Johnson & Johnson Beats on Earnings, Hikes Forecast
JNJ Stock Raises Forecast for Full Year New York, NY — Healthcare giant Johnson & Johnson (NYSE:JNJ) reported a better-than-expected rise in quarterly sales, helped by strength in its pharmaceuticals business. Johnson & Johnson raised its 2016 sales and earnings.
Goldman Sachs Profits Jump 74%
Second-Quarter Profit Grew 74% New York, NY — Goldman Sachs Group Inc (NYSE:GS) reported a 74% jump in its second-quarter profit as fixed-income revenue rose and compensation costs fell. Goldman Sachs’s board of directors declared a dividend of $0.65 per.
Charles Schwab Corporation Reports Earnings, Increases Dividend
New York, NY — In today’s economy, brokerage and banking companies aren’t really the fastest growing. This one company, however, just reported record net income. On Monday, the Charles Schwab Corp (NYSE:SCHW) announced financial results for the second quarter of.