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US Dividend Income Report

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Kalkine’s US Dividend Income Report

What is a Dividend Stock?

A dividend stock is a publicly traded or a private company that regularly shares fraction of its profits with the shareholders in the form of periodic dividend payment (quarterly, semi-annual, annual, or special dividend). There are two commonly used forms in which a company can pay dividend to its shareholders:-

  • Cash dividend: It refers to money paid to shareholders generally from current profit or accumulated profit,
  • Stock Dividend: It refers to a way of paying dividend to shareholders through stocks

In the United States of America companies usually pays quarterly dividend however, other schedules are also possible. Regular dividend paying companies attract individuals who are looking for recurring income from their equity investments. To select a dividend stock investor can generally focus on five broader fundamental metrics- Dividend Yield, Ability of a business to generate free cash flows, Dividend Payout ratio, Dividend payment track record, and Dividend growth.

Why Should You Consider US Dividend Stocks?

  • Offers Dual Benefit of Price Appreciation and Dividend Income
  • May help in Building Retirement Corpus
  • Exposure to Low-to-medium Risk Levels
  • Generate Consistent Flow of Income through Dividends during Volatile Markets

Why Dividend Matters?

Price appreciation in stocks is influenced by variety of factors including company performance, macro-economic factors, political environment, and industry specific factors. On the other side, dividends are generally paid regardless of the broader market direction. The dependability of the recurring income is one of the prime reasons to consider dividends when buying stocks. For example, Procter & Gamble Company (NYSE: PG) a giant consumer goods company has paid dividend every year since 1987.

Source: REFINITIV, Analysis by Kalkine Group

Between 2010 to 2022, the average 10-Year US Treasury Bond Yield has been 2.19% (Source: REFINITIV). So, historically a dividend yield between 2% to 4% can be considered decent.

Given this backdrop, key metrics to consider for dividend stocks include:

  • Current Dividend Yield: Greater than 2% or greater than 10-Year US Treasury Bond Yield
  • Free Cash Flows: Ability of a business to generate consistent free cash over a period of 5-10 years
  • Payout ratio: Typically, 25%-30% or above can be considered as healthy dividend payout
  • Dividend Growth: Healthy mid-to-high single digit compound annual growth rate over past 10-years
  • Leverage Position: Low Debt/Equity ratio and low or improving Net Debt to EBITDA ratio

The Bottom Line

Dividend paying companies might offer a combination of yield, growth, free cash flows and payout ratio. Many dividend-paying companies are in the defensive sector that can withstand economic downturns with less volatility in addition to offering steady income.  

To summarize, Kalkine’s US Dividend Income Report is easy to comprehend with deep insights on dividend paying companies. The report aims to cover stocks after an overall assessment of stock specific events, industry prospects, investment outlook, valuation potential, and associated risks, etc.

US Dividend Income Report

CAD$ 2,700/Year