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.
This High-Yield Stock Looks Interesting One of the things I like to use to show how suppressed dividend yields have become is the average yield of companies in the S&P 500 index. Historically, S&P 500 companies had an average dividend.
This Dividend Stock Looks Special In an era when there’s no shortage of fast-growing industries, who would have thought that a decades-old brick-and-mortar retailer would see its share price shoot through the roof? But it is happening. Just take a.
A Mini-Berkshire Hathaway Inc. Berkshire Hathaway Inc. (NYSE:BRK.A, NYSE:BRK.B) ranks as the world’s most valuable single share of stock. Today, one class-A Berkshire Hathaway share sells for more than $310,000. That could buy you a mid-sized house in most parts.
Looking to Earn an Ultra-High Dividend Yield? Read This To yield-seeking investors, few stocks look more attractive than Genesis Energy, L.P. (NYSE:GEL). The partnership might not make headlines often in the financial media, but it offers a yield that’s higher.
Dividend Giant Making a Comeback If you’ve been following this column, you’d know that I like dividend stocks, not only because they provide a passive income stream, but because dividends can be a sign of strength. In this day and.
This Dividend Stock Keeps Beating the Market; Here’s Why For the past 20 years, this little-known dividend stock has provided a lucrative income stream. Yet I’ll bet dollars to donuts most people have never heard of it. This business has.
Little-Known Stock Provides a Big Payout It’s no secret that dividend investors have a special fondness for blue-chip stocks. Because these companies generally have businesses that are large, established, and diversified, they tend to be in a better position than.
Monthly Dividend Stocks Pay Reliable Retirement Income If you’re looking to generate retirement income from your portfolio, then you have probably run into this problem: infrequent distributions. Most dividend stocks pay dividends on a quarterly basis. Bonds do even worse,.
This Dividend Stock Deserves a Look It’s early October, so the earnings season is yet to be in full swing. However, since companies follow different fiscal years, some of them report earlier than others. One company that recently released its.
Heavy Swarming Over JPMorgan Chase & Co.: Here’s Why If you want to make a lot of money in the stock market, it pays to follow the actions of insiders. As an investor, I like it when executives put their.