When choosing a stock for its dividend yield you are going to want to look at the historical performance of that stock’s dividend payouts. The dividend yield of a stock will typically move back to its long term average, so if you have a stock with a 6% yield now but a historical average of 4% you can expect the dividend yield to drop over time. Conversely a stock with a 2.5% yield now but a historical average of 5% will likely see an increase in the dividend yield over time. Therefore looking at two stocks at a single point in time, one with a 6% current yield and the other with a 2.5% current yield may not be representative of what you can expect over time.
In addition to looking at historical trends, when assessing a company’s ability to pay dividends over time it is important to look at their Free Cash Flow. This is a financial metric that shows you how much cash the company has to pay out dividends and invest in itself without seeking financing for growth. If over several years Free Cash Flow has shown a positive trend you can expect the company to be able to continue to pay dividends. If Free Cash Flow has been negative then the company will increasingly be devoting cash to paying off financing, straining its ability to sustain dividend payments.
Source: Investor Guide
Related Articles:
- 6 High-Dividend, Low P/E Value Stocks
- How Much Money Will You Need Before Retiring?
- The 2013 Dividend Achievers
- 5 Stocks With A Strong Cash To Dividend Coverage
- Dividend Stocks Are My Conviction
How To Find The Best High Dividend Stocks For Your Portfolio
Posted by D4L | Tuesday, June 04, 2013 | 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...
-
The best dividend stocks have one thing in common: resiliency. They can continue increasing their dividends even in the harshest economic en...
-
Dividends and diversification -- those two things can help you achieve a comfortable retirement when combined with the income you will recei...
-
Investors wanting to enjoy steady and consistent income should consider dividend aristocrats. In fact, even in these chaotic times, dividend...
-
A good dividend stock has more than a high yield. Dividends need to be supported by cash flow, and cash flow depends on the long-term streng...
-
Higher dividend yields often imply that the underlying company paying the dividend has a higher risk profile. However, that's not always...
-
It's hard to beat a sustainable, high-yield dividend paired with a beaten-down valuation. The best dividend stocks offer high yields and...
-
When hunting for discounted investments, one excellent starting point is to look for businesses with dividend yields trading above their fiv...
-
Strange but true: seniors fear death less than running out of money in retirement. And unfortunately, even retirees who have built a nest eg...
-
BDCs can be excellent investment options for those seeking high returns, particularly when acquired at favorable valuations and supported by...
0 comments
Post a Comment
Post a Comment
Note: Only a member of this blog may post a comment.