Income investors can get caught up in yields. But something else could make just as big a difference to long-term returns: dividend growth. That's because dividend growth can make lower-yielding stocks into big income producers over time. Take a look below at the income streams from a stock yielding 7% but not growing dividends, versus a 5% yielder that hikes payments 10% every year. In just five years, that 5% yield would actually be worth more than the 7% yield. And just two years later, the income stream would grow to be 27% more than the stock yielding 7%.
Buying stocks that increase dividends allows you to take advantage of one of the most powerful tools in investors' arsenal -- the wealth-building effect of compounding. And consistent dividend growth is like jet fuel for the compounding engine. But there are more advantages to companies able to consistently grow dividend payments. One often overlooked "plus" is that they tend to be safer investments. Dividends are a litmus test of a company's financial strength. Only companies able to increase earnings through good times and bad will commit to consistently raising dividends. And these are the types of businesses that tend to see more stability in their shares.
Source: TheStreet.com
Related Articles:
Dividend Growth Stocks With Big Yields
Posted by D4L | Saturday, September 25, 2010 | ArticleLinks | 0 comments »________________________________________________________________
Subscribe to:
Post Comments (Atom)
~
Popular Posts Last 30 Days
-
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...
-
Boring stocks to buy and hold almost always align with deeply established businesses. While they won’t offer the outstanding growth potentia...
-
The quick rise in interest rates over the past year turned investor sentiment toward REITs negative. Higher interest rates make it harder fo...
-
Indeed, with recession on the horizon, investors are increasingly emphasizing quality, safety and dividends in their portfolio selections. W...
-
Linked here is a detailed quantitative analysis of Texas Instruments Inc. (TXN). Below are some highlights from the above linked analysis: C...
-
Verizon (VZ -1.75%) pays one of the biggest dividends in the S&P 500. The telecom giant currently yields 6.5%. That's one of the top...
-
Countless people dream of being able to pay their bills with the cash they receive from their investments. But it doesn't have to be jus...
-
A great year for dividend growth stocks is one in which there are few dividend cuts and fewer companies that failed to raise their dividends...
-
Cash is king when you’re looking to add dividend stocks to your portfolio There’s ample reason for caution. In case you haven’t noticed, a l...
-
Dividend-paying stocks from low-risk, high-quality companies are a smart way to generate steady and reliable attractive income streams to re...
0 comments
Post a Comment
Post a Comment
Note: Only a member of this blog may post a comment.