But beware the siren call of high-yielding stocks. A high single-digit or low double-digit yield may look attractive at first glance, but yields that fat are rarely sustainable. Consider what a dividend yield is - the current annual dividend divided by the current stock price. A quarterly dividend check will provide little comfort if you invest in a stock that ends up plummeting.
Moreover, that dividend check is no guarantee. Companies are not required to make dividend payments like they are debt payments. If times get tough and money gets tight, checks to the bank and to bondholders will get sent out before your dividend check. It's not uncommon for high-yielding stocks to slash or suspend dividends indefinitely. One only needs to look at investors who picked up shares of General Motors or any of the "stable" bank stocks in 2008 because of their alluring yields to realize that juicy dividends often don't last.
Source: Zacks
Related Articles:
How to Invest in Dividend Stocks
Posted by D4L | Tuesday, January 18, 2011 | ArticleLinks | 1 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...
-
The best dividend stocks have one thing in common: resiliency. They can continue increasing their dividends even in the harshest economic en...
-
Investors wanting to enjoy steady and consistent income should consider dividend aristocrats. In fact, even in these chaotic times, dividend...
-
Higher dividend yields often imply that the underlying company paying the dividend has a higher risk profile. However, that's not always...
-
Dividends and diversification -- those two things can help you achieve a comfortable retirement when combined with the income you will recei...
-
It's hard to beat a sustainable, high-yield dividend paired with a beaten-down valuation. The best dividend stocks offer high yields and...
-
Strange but true: seniors fear death less than running out of money in retirement. And unfortunately, even retirees who have built a nest eg...
-
When hunting for discounted investments, one excellent starting point is to look for businesses with dividend yields trading above their fiv...
-
Today we'll talk dividend deals. Big payers. Stocks yielding up to 10.3% and trading for as little as three-times free cash flow (FCF). ...
-
How high is too high when it comes to dividend stocks? Of course, every income investor wants as much yield as possible. However, they also ...
Learned it the hard way with a stock that had a dividend of only 5%. I did not mind the stock kept plummeting as I comforted myself I still had the dividend. Not for long as they cut the distributions; cut like in zero, nada, zilch, nothing.
No wonder people invest in bonds. At least unless the company goes bankrupt they will pay it.
In hindsight I should have done the same.