Dividend investors often prioritize a stock’s yield above all other factors. While it’s certainly important, it’s also important to examine five other key factors -- payout ratios, earnings growth, free cash flow growth, valuations, and historical dividend hikes. A stock’s payout ratio is the percentage of a company’s earnings which are allocated to dividend payments. The lower this percentage is, the more room a company has to grow its dividend. If the payout remains above 100% for some quarters, the dividend is likely unsustainable. Lastly, some stocks have high yields but don’t raise their dividends annually. A company doesn’t need to be a ’dividend aristocrat’ that has raised its payout for over 25 years, but a strong record of dividend hikes indicates that it’s dedicated to rewarding long-term, buy-and-hold investors with a consistent cut of its profits. If you’re looking for solid income from dividends, look no further. The Motley Fool’s top dividend analyst, who leads our dividend stock newsletter, Income Investor, just picked what he believes are the best income stocks in the market right now. These dividend cash cows could be the latest in a long string of market-beating stocks Income Investor has picked over the years.
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dividend stocks You on a recurring basis it pays you a cash dividend. And over time, thanks to those cash distributions and capital appreciation fueled by shareholder loyalty, the stock price rises. That’s a great way to build wealth.You see, times change, and investors’ priorities vary, but history keeps proving that investing in stocks that pay dividends is one of the best, if not the best, way to build wealth. The reason is fairly simple. If for growth, you may or may not get it. You are speculating, hoping that your analysis is correct, that the stock you’ve invested in will increase in value. But it might not.However, if you that has paid a consistent and growing dividend, well, you can fairly well calculate your growth rate. Consider the Standard & Poor’s 500 stock index. Study after study has proven that the returns of the index without dividends amounts to a fraction of what they are with reinvested dividends factored in. Which means one thing.If you are investing in stocks on an individual basis, not in a mutual fund or an and you are not considering whether or not the stock is paying a dividend, you may just be gambling and may ultimately end up unsatisfied with your results. That’s because dividends are a measure of a success, a company’s maturity and a company’s commitment to its shareholders.The purpose of a company is to increase shareholder value. Paying a dividend attracts new investors and keeps loyal investors in place. Stocks that do not pay a dividend are required to deliver better-than-expected earnings results – merely meeting expectations is not enough and may send a stock price tumbling.
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