Dividends4Life: 2 Little-Known Risks of Dividend Stocks

2 Little-Known Risks of Dividend Stocks

Posted by D4L | Friday, May 01, 2015 | | 0 comments »

Investors love dividend stocks, and many people see them as being among the lowest-risk investments in the stock market. Yet even with their reputation for safety, dividend stocks can be dangerous -- and smart investors prepare for those risks by recognizing the damage they can do to their portfolio if they're not careful. To help you better understand exactly what pitfalls to watch out for, we asked three Motley Fool contributors to talk about what they see as the biggest risks of dividend stocks. Read on to see what they have to say and whether your portfolio might need some adjustments.

Dan Dzombak - One rarely recognized risk of dividend stocks is what happens when a payout is cut. Besides losing a steady payment, dividend investors flee from stocks that reduce or eliminate their payout. In the rush to get out, investors will likely sell for a low price. Jordan Wathen - when a business pays out all of its income as a dividend, any drop in income will ultimately result in a drop in the payout. Dan Caplinger -income-intensive investments are often sensitive to interest rates.

Source: Motley Fool

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