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.
Why FLNG Stock Is Worth a Closer Look By its very nature, the business of liquified natural gas (LNG) shipping companies like FLEX LNG Ltd (NYSE:FLNG) is cyclical. This means investors can’t just add shares to their portfolios and check.
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Lumen Technologies Inc Has Reliable Dividends & Low Payout Ratio Investors like growth stocks because of the potential for outsized gains. This doesn’t work as well when interest rates are going up, though. The tech-heavy Nasdaq is currently in bear-market.
Up 75% Year-to-Date, DSX Stock Is Still Bullish In 2022, many investors have been singing the praises of Diana Shipping Inc (NYSE:DSX), a market-trouncing marine shipping company that recently reported first-quarter earnings and revenue beats and hiked its ultra-high-yield dividend.
Why Undervalued M.D.C. Holdings Stock Is Compelling M.D.C. Holdings, Inc. (NYSE:MDC) is a high-yield dividend stock that has been benefiting from the hot U.S. housing market and rising interest rates. The company has been reporting wonderful financial results and providing.
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LPG Stock’s Price & Dividend Are Up in 2022 Some ultra-high-yield dividend stocks are too good to be true. The higher the yield, the riskier the investment. When it comes to the trend being your friend though, there are few.
NVEC Stock Bullish on Strong Earnings & Revenue Growth NVE Corp (NASDAQ:NVEC) is a great tech stock with reliable, high-yield dividends. For growth investors, the company recently reported significant revenue and earnings growth for the fourth quarter and fiscal year.
Great Outlook for SBLK Stock Whether the companies ship oil, natural gas, grain, iron ore, cars, or refrigerators, marine shipping stocks continue to outpace the broader market. Because of continued supply chain issues, a decrease in fleet growth, significant demand.
Black Stone Minerals LP’s Outlook Is Bullish Black Stone Minerals LP (NYSE:BSM) is an ultra-high-yield dividend stock that has been on a tear since the stock market bottomed in March 2020. BSM stock’s rally has been fueled by high commodity.