These stocks will pay high dividends and provide long-term appreciation
In a world of low interest rates, investors look for yield
wherever they can find it. One common choice has become high dividend stocks.
In the previous century, dividends did not compare well to bank interest rates.
However, as interest rates fell in this century, many decided the equity risk
of stocks were worth the higher yields that dividend stocks pay today.
These stocks tend to come from sectors which produce strong
cash flows. Real estate often becomes a consistent source of these revenues.
Real estate companies can choose to operate as real estate investment trusts
(REITs). These REITs receive favorable tax treatment in exchange for paying at
least 90% of their net income in the form of dividends. As a result, REITs pay
an average dividend yield of 4.59%. This compares favorably to the average
S&P 500 dividend yield of 1.84%.
Also, with some high dividend stocks included in the S&P
500, investors do not have to take on excessive risk to enjoy these yields.
However, just because an S&P stock pays a high dividend does not make it a
promising investment.
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