Dividend stocks have always been popular with investors. Not only do these stocks offer higher income in the current low-rate environment but also provide a cushion against equity market risks.
Moreover, dividend stocks are historically less volatile than non-dividend stocks and are proven outperformers over the long term. These stocks are a safe bet to create wealth with as the dividends generally act as a hedge against economic uncertainty. Moreover, these stocks provide downside protection by offering sizable yields on a regular basis.
Another trade-off to consider while picking dividend stocks is to determine whether to choose low-yield, consistent dividend paying stocks or high-yield stocks that could bring fast cash but are not very consistent. It is up to the individual investor to decide on a stock based upon one’s requirements, but it is always better to choose a consistent performer with strong fundamentals. Also, one must diversify one’s portfolio across industries to minimize risk.
Dividend Growth to Continue Â
According to the latest quarterly dividend factsheet, dividends per share for the S&P 500 (SPY) companies have risen for the 16th consecutive quarter. This marks an increase of 11.9% year over year to $38.77 for the 12-month period ending in Jan, 2015.
On the sector basis, leading the way is ‘Finance’ and ‘Information Technology.’ However, at the company level, the highest dividend payment came from a company in an industry that has lately seen a lot of trouble – Exxon Mobil (XOM - Analyst Report). This integrated oil and gas industry stock paid a cash dividend of 69 cents per share to its investors.
Though over the next 12 months dividend growth is expected to slow down to about 8.2%, the Financial and Industrial sectors are anticipated to continue double-digit dividend growth.
Adding Value to Dividend Stocks
Many investors like to look for value in stocks, but this can be very tough to define. There is great debate regarding which metrics are the best to focus on in this regard, and which are not really quality indicators of future performance. Fortunately, with our new style score system we have identified the key statistics to pay close attention to this and thus estimate which stocks might be the best for value investors in the near term.
Picking the Right Way
