No individual, family, government of publicly traded company can operate long if they are spending more than they earn. That holds true for dividend stocks as well. At eDividendStocks.com we strongly recommend dividend investing strategies, but proper research must be done when selecting dividend paying stocks.
Not every stock can afford to pay a dividend. That’s ok and hopefully those companies are working to develop their business model so that they will have predictable cash flows in the future to sustain a dividend. Other companies try to impress investors by paying out a bigger dividend than they can really afford. This is no different than individuals who buy a bigger house than they can really afford just to impress their friends and neighbors. Eventually, the burden of jumbo mortgage payments leads to disaster.
Source: Seeking Alpha
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