
Forget Penny Stocks! Buy These High-Quality Stocks Instead
Both of these giant stocks have outperformed the market over the past year by a mile.
Investors tend to fall into two camps. One group -- usually younger investors with many years until retirement -- wants to build its wealth by investing in growth stocks. The other -- mainly those near or in retirement -- seeks to generate money passively from income stocks, in order to pay for some of their expenses.
This handy guide helps that latter group of investors to learn which are the best income stocks to buy and to understand how to create an income stocks investing strategy.
An income stock is one that reliably pays a dividend to its shareholders. Dividend payments are typically disbursed in cash that companies send to their investors regularly. Most companies pay quarterly dividends, though some pay only annually or semi-annually, while a handful pay dividends each month. Dividends are paid as a portion of a business's profits.
Unlike growth stocks, which investors buy primarily because they expect the stocks' values to increase, income stocks are attractive to investors who want to earn short-term yields on their investments. You can calculate a stock's dividend yield by dividing its total annual dividend payments by its stock price. For example, consider a stock that pays a quarterly dividend of $0.25 and produces $1.00 in annual payments. If that stock is trading for $20 per share, then its dividend yield is five percent.
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The best income stocks have increasing cash payouts over time; investors who buy these stocks enjoy income streams that grow steadily higher. A stock whose dividend increases by 10% annually doubles its cash payout to shareholders in little more than seven years, while a stock whose dividend rises by 15% annually doubles its cash payout in just five years. Dividend growth tends to drive a stock's price higher, as investors are typically willing to pay more for stocks offering rising cash payouts.
One way to create an income investing strategy is to establish a portfolio of stocks based on their abilities to earn dividend income from the stock market. The stocks mentioned above are three great alternatives with which to get started. You can also purchase a mutual fund or exchange-traded fund (ETF) that is concentrated in dividend-paying stocks. The objective of any income investing strategy is to benefit from a diversified selection of income-generating stocks, as doing so can offset the impact to your portfolio from any one company reducing or suspending its dividend, whether due to market conditions or financial struggles or both.
Both of these giant stocks have outperformed the market over the past year by a mile.
We'll take a look at the bank's dividend yield and the history of U.S. Bancorp's dividend to see if this is a great dividend stock.
A major spinoff and increasing cloud focus will influence the company's direction.
Don't let these golden eggs get away.
It's spinning off its pay-TV business, but keeping 70%.
If you like dividends but also want some business growth potential, IBM is well worth your attention.
These are serious dividend-paying machines.
Diversity isn't just for show -- it's tied to outperformance and superior profitability.
They've been outperforming the market by wide margins and there's reason to expect much more growth ahead.
It's growing fast and has a compelling business model.