Buying shares of companies that pay a dividend is like purchasing an income stream. Investing in companies that regularly boost their dividends is like getting a raise on a consistent basis. Of course, it comes with risks. Those dividends need to be backed by expanding free cash flow and a company shouldn’t pay too much of its free cash flow out in dividends. Personally, I prefer that a company that pays out less than 50% of its annual free cash flow out in dividends.
William Bias has been researching stocks since 1992 and has been a freelance writer since 2012. He employs a strategic business oriented approach to stock market investing.