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.
AM Stock: Strong Dividends & Stock Growth It’s easy to find a mediocre stock with a high dividend yield that magically gets higher as its underlying share price drops. There’s no better way to destroy wealth than to invest in.
A High-Yield Real Estate Stock to Think About It doesn’t take a rocket scientist to see why Ellington Financial Inc (NYSE:EFC) could be special. In today’s market, most dividend stocks follow quarterly distribution schedules. Ellington Financial, however, pays investors monthly..
SRLP Stock at Record Levels & Positioned to Grow With a market cap of just $695.6 million, Sprague Resources LP (NYSE:SRLP) is relatively small, compared to other stocks in the oil and gas refining and marketing industry. So it’s not.
Pembina Pipeline Corp Set to Become Pipeline Behemoth When it comes to midstream oil and gas companies, Pembina Pipeline Corp (NYSE:PBA) was already an industry giant that should have been on investors’ radar. But the company’s recently announced blockbuster acquisition.
Looking for High-Yield Stocks? Read This If you’re looking for oversized dividends in today’s low-yield environment, a group of companies I’ve dubbed “alternative banks” could be worth a look. I call them alternative banks because they make money by lending.
This Dividend Stock Looks Interesting For the most part, Iron Mountain Inc (NYSE:IRM) has been living on the “boring” side of the stock market. Founded in 1951, the company is in the storage business, helping its customers protect valued assets.
Lumen Technologies Stock: Big Dividends & Strong Stock Growth Technology stocks aren’t known for big dividends. That’s because most tech companies aren’t making any money. And the big tech companies that are profitable are pretty miserly with their dividends. If.
A High-Yield Stock Investors Can Count on To retirement investors, dividend safety is of utmost importance. And that’s why I usually say, if you’re looking for stocks to add to your retirement portfolio, don’t go for the highest yielders. In.
Enterprise Products Partners L.P. Gains Traction as U.S. Economy Reopens For years now, interest rates have been near record lows, which means the Federal Reserve has effectively eliminated “income” from income investing. As a result, income-starved investors have been turning.
Kick the Fed to the Curb With ARR Stock Over the decades, investors looking for a financial safety net in their retirement turned to reliable fixed-income vehicles like treasuries, bonds, and certificates of deposit (CDs). That doesn’t work anymore. Yields.