Dividend stocks and income investing are back on everyone’s radar in 2023. Safe mainstays like short-term Treasury Bills and high-yield savings accounting generate decent returns for the first in years. Still, some investors want to avoid broad market volatility and shy away from tech and growth stocks but want to squeeze a few more basis points from their investment.
The dividend yield isn’t the final say in income investing strategies, though. Investors often dig a bit further below the surface to uncover the company’s payout ratio. This metric, calculated as the proportion of earnings paid out as dividends, provides a more complete picture than just the dividend yield. It helps income-focused investors gauge whether a company can maintain or increase its dividends over time, ensuring a reliable income stream – ultimately prizing longevity alongside cash flow.
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