Dividends can be an equalizing factor when comparing stocks. For example, you can be looking at one stock that is up 5% and another that is up 7% over a period of time. However, the stock that is up 5% pays a dividend while the one that pays 7% does not. That dividend factors into the stock’s total return. Therefore although the former would appear to offer a better return, the stock that pays a dividend may actually provide a higher total return.
Dividends are a portion of a company’s profit reflected as a percentage. However, this percentage changes with the company’s stock price. For that reason, a common mistake investors make is to chase a yield. But a company that pays a 4% dividend yield may be a far better investment than a company with an 8% yield. Here’s why.
The most important attribute of a dividend is its reliability. Getting a solid dividend one year has very little meaning if the company has to suspend, or cut, its dividend the next year. Investors want to own stocks in companies that have a solid history of paying a regular dividend.
Another important consideration is a company’s ability to increase its dividend. This means that the company is increasing the amount of the dividend regardless of stock price. Companies that do this over a specific period of time have achieved a special status. Dividend Aristocrats are companies that have increased their dividend every year for at least the last 25 years. Dividend Kings have increased their dividends every year for at least the last 50 years.
In this presentation, we highlight seven companies that offer a nice dividend and the opportunity for decent growth.
Click on Continue to view the “7 Stocks That Prove Dividends Matter”.
Click the "Continue to Slide #1" button to view the first company.
