Are Your Dividends Safe?

Whether the goal is to generate income, supplement total return, or cushion the blow of a falling market, most investors can benefit from holding dividend-paying stocks. Dividends are not guaranteed, and ultimately depend on the board of directors’ approval. That said, companies have gone to extreme lengths in the past to avoid cutting their payments. However, sometimes dire circumstances may not offer any alternative.

The dividend payout ratio can be found on the Value Line Page at the bottom of the statistical array under “All Div’ds to Net Profit”. Value Line, like most, calculates the dividend payout ratio as “all dividends declared” divided by “net profit”, which represents the amount of profit paid out to shareholders. A healthy range for large mature companies is between 40%-60%. However, companies have unique capital requirements and operating conditions, so the payout ratio should be compared against industry peers.

Source: Value Line

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