The most reliable stocks to invest in have a history of success and dividends that have increased over time
The most reliable stocks to invest in pay sustainable dividends that have been maintained or raised during economic or stock-market downturns. Generally, 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 an indication that investing in the stock will likely be profitable for you in the future.
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.
When you’re looking for the most reliable stocks to invest in, look for high-dividend Canadian stocks that also have long-term value
At TSI Network, we’ve always placed a high value on dividend stock investing, mainly because it provides something of a measure of safety for stocks we recommend.
After all, you can’t fake a record of dividends. It takes a lot of success and high-quality management for a company to have the cash to declare and pay a dividend every year for five or 10 years or more. High-dividend Canadian stocks are not something created on the spur of the moment.
We also recommend Canadian dividend stocks because Canadian taxpayers who hold Canadian dividend stocks are eligible for the dividend tax credit in Canada.
This dividend tax credit—which is available for dividends paid on Canadian stocks held outside of an RRSP, RRIF or TFSA—will cut your effective tax rate.
This means that dividend income will be taxed at a lower rate than the same amount of interest income (investors in the highest tax bracket pay tax of around 29% on dividends, compared to 50% on interest income—investors in the higher tax bracket pay tax on capital gains at a rate of 25%.)
The most reliable stocks to invest in have a dividend yield that isn’t “too” high
Dividend yield, and high yield especially, can give you a false sense of security. Some investors in high-dividend stocks have a natural tendency to think that all investment income is nearly as safe and predictable as bank interest. In fact, investment income can dry up in a heartbeat. Companies are sometimes unable to honour their commitments, and they sometimes spring the bad news on investors with no warning.
Rather than a sign of a bargain, an unusually high yield may be a danger sign. It may mean insiders are selling and pushing the price down. A falling price makes yield go up (because you use the latest dividend to calculate yield). When an investment does cut or halt its dividend, its yield collapses.
Many of the most reliable stocks to invest in have a history of steady dividends
Some good companies reinvest profits instead of paying dividends. But fraudulent and failing companies hardly ever pay dividends. So if you only buy stocks that pay dividends, you’ll automatically stay out of almost all the market’s worst stocks.
These types of stocks give investors an additional measure of safety in volatile markets. And the best ones offer an attractive combination of moderate p/e’s (the ratio of a stock’s price per share to its per-share earnings), steady or rising dividend yields (annual dividend divided by the share price), and promising growth prospects.
Furthermore, by diversifying across most if not all of the five sectors, you avoid overloading yourself with stocks that are about to slump simply because of industry conditions or investor fashion.
Dividend-paying stocks are some of the most reliable stocks to invest in and they can be a big part of long-term investment gains
If you stick with top-quality dividend stocks, the income you earn can supply a significant percentage of your total return—as much as a third of your gains. And at the same time, dividends are more dependable than capital gains as a source of investment income.
Above all, note that when it comes to investment safety, a long history of steady dividends is more important than a current high dividend yield.
All in all, good dividend stocks are a valuable component of any sound investment portfolio.
How much attention do you pay to dividend yield?
Companies with a history of paying dividends are almost always a good investment, but nothing is guaranteed. Have you ever lost money with a dividend-paying investment?
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.
Get Your FREE Report Now:
7 Winning Strategies for Dividend Investors
X No, I don’t want to make steady income from dividends.
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The Successful Investor Inc. and its affiliate Successful Investor Wealth Management (referred to hereafter as TSI Network) know that you care how information about you is used and shared, and we appreciate your trust that we will do so carefully and sensibly. This notice describes our privacy policy. By visiting websites owned by or associated with TSI Network, you are accepting the practices described in this Privacy Policy.
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