The power of dividend investing is pretty well-known these days. Higher-yielding stocks tend to offer higher returns over time than low- or no-yield stocks, according to research from Jeremy Siegel and others. In fact, the 20 best-performing survivor stocks from the original S&P 500 in 1957 are all dividend payers. What's more, reinvesting dividends acts as a "bear-market protector and return accelerator," according to Siegel. The extra shares purchased and accumulated at higher dividend yields during down periods act as a protector in falling markets, and these extra shares rising in value turn into a "return accelerator" when prices rise.
As the recent economic crisis illustrated all too well, however, you can't buy just any high-yielding stock. Dividends that are cut or suspended entirely can wreak havoc on a stock price, and thus your portfolio. Fortunately, there are some steps you can take to lessen your chances of buying one of these train wrecks. James Early, advisor of our Motley Fool Income Investor service, suggests looking at the payout ratio for starters. That's simply the percentage of a company's net income that is used to pay its dividend. Obviously, the higher the payout ratio, the tougher it is for a company to meet its dividend obligation. James looks for a payout ratio below 80% for safer companies, and a sub-60%- or even 50%-payout for companies you consider risky.
Source: Motley Fool
Related Articles:
________________________________________________________________
Subscribe to:
Post Comments (Atom)
Dividend Growth Stocks News
~
Popular Posts Last 30 Days
-
If you're worried about inflation rearing its ugly head next year, you should probably worry about more likely catastrophes, such as bei...
-
As a relatively new blogger, the one thing that has stood out in my mind is the number of Canadian bloggers in the areas that I am most inte...
-
We screened our 24/7 Wall St. dividend equity research database and found 5 stocks that combined can generate over $3,000 of annual passive ...
-
The stock market has been on an upward path of late, with some of the most prominent stocks hitting astronomical highs. The dividend yield o...
-
Dividend growth stocks can be incredibly attractive investments if you crave recurring income. As these types of stocks raise their dividend...
-
Dividends can be a tremendously powerful part of your investing strategy. Not only can they give you a continuing source of cash to reinvest...
-
The most dependable dividend stocks typically have a long track record of sustaining payouts through different market cycles. Companies with...
-
In my opinion, there are three criteria investors should consider when evaluating a particular stock for their portfolio. The first is histo...
-
As the broader stock rally broadens to some of the more “boring” corners of the market, it’s the higher-yielding dividend plays that could s...
-
Double your money in a short time. Few investors would walk away from such an opportunity. Of course, there's no guarantee that any inve...
0 comments
Post a Comment
Post a Comment
Note: Only a member of this blog may post a comment.