Dividend Stocks
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.
Genuine Parts Company: 64 Years of Dividend Increases and Still Going Strong
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USA Compression Partners LP: Can Investors Count on This 17.3% Yield?
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173-Year-Old “Forever Asset” Keeps Beating the Market
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Why I’m Banking on Annaly Capital Management, Inc.’s 12% Yield
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This Number Shows Why STAG Industrial Is a Top Monthly Dividend Stock
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Hess Midstream Operations LP: A 10% Yield That Keeps on Growing?
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Mondelez International Inc: “Oreo” Maker Delivers Healthy Dividends
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Got $5,000? 3 High-Yield Dividend Stocks Paying Up to 12.4%
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Prospect Capital Corporation: Monthly Dividend Stock Yields 14%
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The Dividend Stock Defying COVID-19
American Tower Corporation Still Thriving Despite Lockdown Wall Street has fretted this summer over a pandemic, widespread protests, and the upcoming presidential election. But you wouldn’t know it by reading through American Tower Corporation’s (NYSE:AMT) recent financial results. The partnership’s.
