Goldman Sachs estimates that dividends will be the source of nearly half of all market returns over the next 10 years. That's a lot of money to be missing out on. To prepare your portfolio for these profitable picks, it's important to understand what the world of dividend stocks looks like.
Here are three dividend stock stats everyone should know.
80 growth stocks with dividends: Too good to be true?
Looking for a growth dividend stock? If you're in the market for stocks with a price-to-earnings ratio above 50 and a 3% or higher dividend yield, around 80 stocks meet your criteria. But growth dividend stocks are, in some ways, an oxymoron. Can a company whose stock is priced at a massive 50 times its recent earnings really deliver on that promise while returning a sizable chunk of cash directly to investors? Yes and no.
Some of the best dividend growth stocks of 2015 give us a hint as to which might be winners. General Electric Company (GE 0.71%) made investors extremely happy last year. Its stock price increased 20%, and it kept its distribution steady as its yield varied from 3% to nearly 4% throughout the year. By selling off its GE Capital unit and increasing investments in its core industrial business, GE inspired investors to believe that one of the biggest stocks by market cap on the market still has plenty of room to grow.
Other growth dividend stocks suffered a decidedly different fate from General Electric Company. The worst dividend growth stocks of 2015 embodied big promises that ultimately failed to pan out. For two of the worst offenders, a disappearing merger and plummeting oil and gas prices served as important reminders that growth is far from guaranteed.
284 double-digit dividend yields: Buy or sell?
There are currently 284 dividend stocks that tout yields in excess of 10%. Those are huge dividends and, at first glance, seem like the best dividend stock picks for your portfolio. But not all dividend stocks are created equal, and plummeting stock prices may make that massive dividend yield seem a lot worse.
In 2015, Freeport-McMoRan (FCX -0.49%) and Teekay Corporation (TK 2.02%) took the crumble cake for worst dividend stocks. Copper producer Freeport-McMoran saw share prices corrode around 70% through 2015, while oil and gas shipping company Teekay left shareholders with just one-fifth of the investment they held at the start of the year.
In December 2015, Teekay Corporation cut its distribution 90% while Freeport-McMoRan suspended its dividend entirely. These high-yield dividend stocks aren't looking so hot in 2016, and there are many more out there investors should avoid. Just because 284 dividend stocks offer double-digit yields doesn't mean even one should necessarily be a part of your 2016 dividend stock portfolio. Look beyond the yields and prepare yourself for a profitable 2016.
Finding your dividend diamond among the 3,500
Growth dividend stocks and high-yield dividend stocks are what everyone wants -- but picking winners in these oddball categories can be extremely difficult. Luckily for you, around half of all stocks offer a dividend of some sort. That means there are around 3,500 stocks to pick from for reasons that go well beyond just their dividend yield.
Now that you know the lay of the dividend stock land, you'll need to dig much deeper than dividend stats alone. Begin with the basics, review which dividend stocks have delivered for decades, and evaluate the experts to see what they're choosing and why. Filters aren't everything, and understanding the fundamentals behind winning picks is essential to ensuring enduring profits for your dividend stock portfolio.