More often than not, dividend-paying stocks form the foundation of any successful long-term investment portfolio. They also, coincidentally, tend to handily outperform their non-dividend-paying peers over time.
But aside from sheer outperformance, dividend stocks bring three benefits to the table that investors seem to appreciate. First, dividend stocks usually have time-tested business models and relatively clear long-term outlooks -- otherwise they wouldn't be sharing a percentage of their profits with shareholders. Second, dividend payouts act as a means to partially hedge against the inevitable "hiccups" the stock market undergoes. Finally, dividends can be reinvested back into more shares of dividend-paying stock, supercharging your ability to build wealth.
The Great Dividend Conundrum
However, dividends also offer investors quite the conundrum: We want the highest yield possible, but we also want the payout to be sustainable over a long period of time. Though each case varies, the higher the yield, the more unsustainable the payout. Remember, dividend yield is a function of the total payout and a stock's share price. As an example, if a company's underlying business model is in trouble, and its share price loses 50%, its dividend yield will double, providing a dangerous lure for unsuspecting investors.
By Liana B. Baker and Greg Roumeliotis
(Reuters) - Buyout firm Apollo Global Management LLC (APO.N) has approached Xerox Corp (XRX.N) to express interest in a possible acquisition, casting new uncertainty over the U.S. printer company's $6.1 billion sale to Japan's Fujifilm Holdings <4901.T>, people familiar with the matter said on Wednesday.
The development marks the latest twist in Xerox's saga. On Tuesday, Xerox said its chief executive, Jeff Jacobson, and most of its board will step down to settle a lawsuit by activist shareholders Carl Icahn and Darwin Deason.
Whether there will be war or peace seems to be a bit of a toss up, but recent news leans toward the white flag. Daily newspaper Munhwa Ilbo reported Tuesday that a summit next week between North Korean premier Kim Jong Un and South Korean President Jae-in, could negotiate an outline to end confrontation, and in doing so, ease the ongoing east vs west trade war.