Investment Checklist For Blue Chip Dividend Stocks
Blue-chip dividend stocks are some of the most attractive investments for income and capital. Originally, the term defined stocks with high share prices but is now known for its high quality in the stock. Most of these stocks pay a dividend because they come from older companies with large earnings and cash flow that is distributed to its stockholders. It is why most investors look at companies with blue-chip dividend stocks to see what their dividend health check is like from the last decade. Here is a list to go through when looking for companies with blue chips dividend stocks.
Table of Contents
How The Company Got So Successful
Some companies got big through incredible strategy or just by pure luck. Those that grow because of the latter come from a time of strong, consistent growth in stocks that eventually reach an end. Certain stocks are limited by supply and demand, cutting off the cycle of the stock’s growth. On the other side of the successful spectrum, investment in long-term stocks is strategically beneficial because they are more open-ended.
What is The Trend Showing?
A company’s results can show what is in demand in the market that is the reason for the company’s success or struggles. If sales are declining, the trend needs to define if it’s temporary or something more. It takes a while for blue-chip dividend stocks to become profitable and there might be something better to invest in a shorter time from now.
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The Market Size
The larger the market, the bigger the chances blue-chip dividend stocks can keep growing. Look at how the market is with the size of the GDP, as well as any possible long-term growth plus expansion into other markets. Consider how new competitors could change the market and what the company can do to prepare for any sudden interference from these new competitors.
The best blue-chip dividend stocks will create positive cash flow for years, creating value through reinvestment, increasing dividends, paying off debts, and getting new acquisitions. A lack of cash flow prevents companies from making important investments and getting more credit in their acquisitions. It is things like this that can harm a company into bankruptcy.
What The Payout is Like
Companies grow their dividends in different ways, but free cash flow growth is the single sustainable way of having dividend growth. Their payout is based on how much earnings a dividend of the company is taking in, usually passing the inflation rate, allowing it to grow as much as the cash flow does. Some companies have their payout at 50% and others are at 60%, but those with lower payout ratios give room for growth later on.
Blue-chip dividend stocks can be great investments for people who are planning to use those earnings for their retirement fund. While a lot of blue-chip dividend stocks have survived challenges in the past, it does not guarantee their survival in the near future. The rapid growth of changes in technology, growth of economic globalization, and pressure from startup companies have shortened a company’s life, studies have shown. New investors are more concerned because of this shortened lifespan of these companies and stocks and their dividends. It’s still worth investing in, but it is important for investors to do research before committing fully.