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)
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...
-
In my opinion, there are three criteria investors should consider when evaluating a particular stock for their portfolio. The first is histo...
-
Dividends can be a tremendously powerful part of your investing strategy. Not only can they give you a continuing source of cash to reinvest...
-
In this article, we discuss 5 best March dividend stocks to buy. If you want to read our detailed analysis of dividend capture strategy and ...
-
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.