The Dow Jones Industrial Average Dropped about 800 points on April 26th S & P 500 It has decreased by more than 11% since the beginning of the year. This puts the stock market in the correction zone, dropping more than 10%. So, like most portfolios, most equities have been in the negative territory to date.
Long-term investors believe in their holdings and should not make a hasty decision unless virtually anything has changed in a particular stock or in the industry. The fix will not last as long as the bull market historically continues, and selling now only traps your losses before the market gets a chance to return.
But regardless of the market environment, it may be good to know that there are some stocks that you pay to own them-dividend stocks. These are especially important in such markets as they can increase your total return and provide you with some income.
Dividend stocks are stocks that pay investors regular dividends or cash distributions, usually quarterly and possibly once a month. Approximately 84% of S & P 500 stocks pay dividends, but only about half of small cap stocks pay dividends.
Normal, Highest dividend stock It is a large-scale excellent company with a history of stable and stable profits. Dividends are paid from earnings, so the highest dividend stocks have consistent earnings. This is why many SMEs do not pay dividends or pay lower dividends. The same is true for young growing companies that are investing large amounts of capital in future growth.
There are several different indicators you should look at when valuing dividend stocks. The first is the period during which the company has consistently increased dividends. Companies that have increased their annual payments for more than 25 years in a row Dividend aristocrat.. Some companies with the longest stripes are quite familiar- Procter & Gamble (65 years old), coca cola (59 years old), and Johnson & Johnson (59 years old).
Another important indicator is yield. Yield is the percentage of stock price paid in dividends. The average yield on the S & P 500 is around 1.37%. Therefore, yields above that are considered good. Yields on some companies are 4%, 5%, or higher. The largest bank in the country, JPMorgan ChaseFor example, there is a yield of 3.25%. We paid a quarterly dividend of $ 1.00 per share this quarter, based on a price of approximately $ 122 per share.
Therefore, if you own 50 shares of JPMorgan Chase, you will earn $ 50 in dividend income quarterly, which you can pocket or reinvest in your shares. Annually, stocks generate $ 4 per share, or $ 200 for 50 shares.
Payout rate and total return
Another factor to consider is the payment rate, which is the percentage of quarterly revenue allocated to pay dividends. This indicator shows whether the company is too much or too little for dividends. Generally speaking, stocks with a dividend rate of more than 50% or 60% may be paying a large amount of dividends as their earnings may be better allocated to the growth of the company. there is.
Dividend rates of less than 50%, on the other hand, are generally a good indicator that a company maintains a solid dividend without sacrificing other investment or growth opportunities. Payout rates of 25% to 40% may be considered sweet spots. Those below 20% may be low, which indicates that the company may be paying dividends.
As mentioned, You can keep the dividend It can be reinvested as income or in stock. When they are reinvested, they contribute to the total return of the stock, which is a combination of a rise in capital (or a rise in stock price) and the reinvested dividend.
Dividends have accounted for 40% of S & P 500 returns since 1930, according to a recent report from Fidelity Investments. However, during periods of high inflation, dividends make up a higher percentage of returns. For example, during the period of high inflation in the 1970s, dividends accounted for 71% of the total return of the S & P 500. In the 1940s, another period of high inflation, it was 65%. Conversely, in the bull market of the 2010s, it was only 16%.
Inflation is as high as it was about 40 years ago, so it’s a good time to look for some good dividend stocks to offset some of the losses.
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JPMorgan Chase is an advertising partner for The Motley Fool’s company, The Ascent. Dave Kovaleschi There are no positions in any of the listed stocks. Motley Fool recommends Johnson & Johnson. The Motley Fool Disclosure policy..
Believe it or not, these stocks pay you to own them | Business News
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