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.
Time to Pay Attention to Lowe’s Stock If you think there’s no money to be made in retailers’ stocks because of the so-called retail apocalypse, think again. Lowe’s Companies, Inc. (NYSE:LOW), which operates a chain of home improvement retail stores.
Reminder: Pessimists Keep Getting It Wrong on U.S. Stocks U.S. stocks should plunge when the economy slows down. But investors, apparently, didn’t get the memo. The latest round of economic data has come in weaker than a two-day-old kitten. Truck.
A High-Yield Tech Stock to Think About It’s no secret that technology investors have made some of the biggest profits in the stock market. With many tech companies growing at a rapid pace, double- and even triple-digit returns are possible.
How to Begin Earning a 10% Yield From These Income Investments Struggling to earn decent yields from income investments? You’re not alone. Millions of retirees have found themselves on the wrong end of the Federal Reserve’s low interest rate policy..
Rising Distributions From BEP Stock No matter what your opinion is on the subject of climate change, it’s hard to deny that the renewable energy industry has been booming. For those who want to get a piece of the action,.
Earn Steady Investment Income From “Uncle Sam” Each year, it seems like politicians find a new way to take our hard-earned money: income tax, sales tax, property tax, investment income tax, etc. When it comes to picking the pockets of.
Looking to Earn a Passive Income? Read This Owning real estate is one of the most well-known ways to earn passive income. But if you’ve been a landlord before, you’d know that this income is not as passive as it.
Disney Stock Making a Strong Comeback Remember when Walt Disney Co (NYSE:DIS) stock was having a choppy ride a few years ago? Due to concerns about the company’s cable TV business, Disney shares traded sideways for the most part from.
Should Investors Buy Stocks at All-Time Highs? Last week, a reader sent me an interesting question about buying stocks at all-time highs: “Rob, the market keeps hitting record after record. I feel like I missed the boat. Should I buy.
Warren Buffett Sees More Upside in Bank of America Stock Warren Buffett ranks as one of the best investors on the planet. In 1964, he bought a small textile manufacturer called Berkshire Hathaway Inc. (NYSE:BRK.B). Over the following decades, Buffett.