Just because you're investing in income stocks, doesn't mean you have to sacrifice growth
Although many investors like to follow equities for
potential stock price increases, a large number also choose to focus on income
stocks. Some stocks offer cash payouts compelling enough to make dividend
stocks the stocks to buy. This is especially true for investors focused on cash
flow or retirees who depend on their assets to generate income.
The average S&P 500 stock dividend yield currently
stands at just over 1.9%. While that may not impress many investors, that still
beats yields one can find at many banks. Also, it allows for the long-term
appreciation gained by investing in S&P 500 equities.
Income-focused investors tend to look at two classes of
dividend stocks. Some income stocks have earned the designation of “dividend
aristocrat.” These equities have increased dividend payouts for a minimum of 25
consecutive years. While no stock has to pay a dividend, relinquishing dividend
aristocrat status will usually lead to the mass selling of a stock. Hence,
dividend stocks which can avoid such an outcome will almost always continue
paying and increasing dividends.
Real estate investment trusts (REITs) have also become
popular income stocks. These equities stand out for their investments in both
real property or the mortgage securities related to real estate investing. They
also have become popular because REITs have to pay out 90% of their net income
to receive an exemption from federal income tax on their operational income.
REITs also pay a higher average dividend. This average payout of 4.36% stands
at more than double the yield seen from the average S&P 500 equity.
However, most investors want to beat averages. As such,
these five income stocks offer higher than average dividends as well as the
potential for stock price growth:
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