3 Dividend Deals and 3 Dividend Deadbeats

Beyond the historical precedents in favor of dividend, or high-yield, investing, there are also factors in the current market environment that make these stocks especially profitable. Unfortunately for the uninformed investor, there are more than a few dividend deadbeats in sheep’s clothing that will potentially devastate your portfolio. According to Standard & Poor’s, dividends have historically accounted for approximately a third of the total return to equities and have less volatility of returns than price appreciation. Dividend income is taxed at a lower rate than ordinary income, making it a good source of cash as well. Currently, corporate balance sheets are ripe with excess cash but economic conditions are not presenting profitable NPV projects. If this cash is not reinvested in capital projects, shareholders will soon begin demanding that firms release some of these funds in increased dividends. How to spot a deal and avoid a deadbeat One of the... Read more