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.
MRCC Stock: Consider This High Yield The past several years haven’t been the nicest to income investors. The most solid dividend-paying companies were already expensive. That means they don’t offer much in terms of yield, while the high-yield stocks weren’t.
Tiny Stock Pays Big Yields Last month, I told you about the little-known dividend stocks that would beat the market this year, and likely for many years to come. These firms don’t have the size and reputation of their larger.
If You Want to Earn a Double-Digit Yield, Read This Risk-averse investors tend to stay away from ultra-high-yielding stocks, but you might want to make an exception for this one. I’m talking about Alliance Resource Partners, L.P. (NASDAQ:ARLP), a master.
An Income Stock You Can Count On Quality stocks seldom go on sale, especially when they also pay a dividend. But with the recent market sell-off, even some of the most solid dividend payers have been put in the penalty.
NKE Stock: Just Do It? The best things sometimes come in small packages. You could say that the same thing applies to dividend investing. Consider Nike Inc (NYSE:NKE). Over the past decade, the yield on shares has averaged less than.
Investing in a Market Sell-Off “So 2018 was a bad year for stocks, will 2019 be worse?” That’s a question I got asked a lot during this holiday season. After witnessing the huge sell-off in the U.S. stock market—particularly in.
You Can Trust This 6% Yield I reject most of the high-yield stocks that cross my desk. Readers love big payouts. Most companies, however, can’t deliver both safety and a high yield. But once in a while, I get a.
A Rare Find in the Stock Market In today’s stock market, what could be better than a safe yield of over 10%? The answer: a double-digit yielder that keeps growing its payout. I know, in an era where most companies.
Investing in the War on Opioids Opioids kill hundreds of Americans each day. I probably don’t need to remind you; you can see the signs of a crisis in many areas of the U.S., including overstretched emergency rooms and addicts.
Shareholders Getting a Year-End Bonus In the current market environment, few things are better than a bonus check for equity investors. Of course, I’m talking about special dividends, which are one-time payments from companies to their shareholders. Given what’s been.