Finding the best long-term dividend stocks is easier when you follow these eight factors
The best dividend stocks will not only continue to pay and increase their dividends, but will also have growing sales and earnings, sound management, a strong position within their industries and, often, hidden assets waiting to be unlocked.
These are the best long-term dividend stocks that will keep on rewarding investors like you.
Our Dividend Sustainability Ratings will lead you to them. Learn about the factors that the Dividend Sustainability Ratings are based on below.
The Growing Power of Dividends
Learn everything you need to know in '7 Winning Strategies for Dividend Investors' for FREE from The Successful Investor.
The Best Canadian Dividend Stocks to Buy: REITS Canada and other Top Canadian Dividend Stocks.
The best long-term dividend stocks can be found through these factors
A long-term record of dividend payment
This is the prime measure of strength and stability. With weak or troubled firms, the dividend is often the first thing to be discarded, if it was ever paid at all. We assess these points by tracing a company’s dividend record over the past 10 years.
A recent dividend increase
There are good reasons companies trumpet their dividend hikes. They are more than a reward to shareholders, they’re a statement of self-confidence by the company. We trace increases over 5 years and more, to get a timely reading on the company’s commitment to dividend increases.
Management’s public commitment to a dividend
A company’s commitment to the dividend is reinforced if management stands behind it publicly. Executives don’t like to be called out by the media or shareholders for failing to keep their word.
Being in a non-cyclical industry
TSI Dividend Advisor will include stocks in the Resource and Manufacturing sectors. But all experienced investors know that stocks in these sectors are more likely to reduce their dividends when the economic cycle is against them. So stocks in more consistently stable sectors get an extra point.
Limited exposure to exchange rate/political risk
The Growing Power of Dividends
Learn everything you need to know in '7 Winning Strategies for Dividend Investors' for FREE from The Successful Investor.
The Best Canadian Dividend Stocks to Buy: REITS Canada and other Top Canadian Dividend Stocks.
All companies with international operations will suffer to some degree from exchange rates. This is especially true of U.S. multinationals, who can lose revenue to a strong U.S. dollar (and therefore weaker foreign currencies). This may be offset by rising sales, and rarely affects their dividends. Political risk is a greater danger. You will find few if any stocks in this advisory that subject a substantial part of their businesses to the hazards of politically unstable nations or predatory governments.
An attractive balance sheet
To pay dividends, a company must be able to count on a reliable source of revenuel, but we also insist on a strong balance sheet with a manageable level of debt. How a company spends its money is important, too. Acquisitions can be good, for instance, but too many of them can take a bite out of a company’s cash and push the debt load (and goodwill) to uncomfortable levels.
A record of earnings and cash flow
A consistently strong balance sheet can only be maintained with a regular stream of revenue and earnings to generate steady cash flow.
Industry prominence
Companies with a major presence in their industry, and that also anticipate advances in their industry, adjust to changing conditions and technology and withstand strong competition will have the confidence to pay dividends year after year.
The biggest risk with the best long-term dividend stocks
When looking for stocks with high dividend yields, you should avoid the temptation of seeking out stocks with the highest yield—simply because they have above-average yields.
That’s because a high yield may signal danger rather than a bargain if it reflects widespread investor skepticism that a company can keep paying its current dividend.
Dividend cuts will always undermine investor confidence, and can quickly push down a company’s stock price.
Above all, for a true measure of stability, focus on stocks that have a high dividend yield that they have maintained or raised with their dividends during economic or stock-market downturns. That’s because these firms leave themselves enough room to handle periods of earnings volatility. By continually rewarding investors, and retaining enough cash to finance their businesses, they also provide an attractive mix of safety, income and growth.
A track record of dividend payments is a strong sign of reliability and a strong indication that you may be investing in the best long-term dividend stocks.
Do you seek the best long-term dividend stocks? Have you found our eight tips for picking them helpful? Share your thoughts with us in the comments.
Learn everything you need to know in
'7 Winning Strategies for Dividend Investors'
FREE Special Report from The Successful Investor.
The Best Canadian Dividend Stocks to Buy:
REITS Canada and other Top Canadian Dividend Stocks.
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