Look For Stable Earnings When Selecting Dividend Stocks

When stalking for leading stocks that can grow yet also pay dividends, look for those with stable earnings. This is important because dividends are paid out from a company's profits. Do not automatically pick the ones with the highest yields. Remember, firms don't have to pay shareholder dividends. Still, many do in order to satisfy shareholders who want to see a return of capital. Companies also pay dividends when they see no investment opportunities that they want to take advantage of.

Dividends on common shares, which are most often talked about, are not set in stone. Companies can reduce or stop paying dividends at their discretion. During the Great Recession from a few years back, firms such as Bank Of America (BAC), Citigroup (C), General Electric (GE), Pfizer (PFE) and Wells Fargo (WFC) all either slashed or halted their dividend payments to shareholders in order to preserve cash.

Source: Investors.com

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