Investors must weigh the pros and cons before making a selection.
Investors must weigh the pros and cons before making a selection.
According to S&P Global's Global Market Intelligence, more than 80% of the companies in the S&P 500 index pay a dividend. Because the opportunity set is large, income-focused investing is a popular strategy among the retail crowd.
It makes sense why. Investing in growth stocks means betting on future earnings that may or may not materialize. Value investing, on the other hand, relies on the market eventually agreeing with your assessment of a particular bargain opportunity. There is uncertainty with these strategies.
Dividends provide a cash inflow to investors in up and down markets. And if you reinvest these distributions, it can boost the total return.
But it's important to understand that not all dividends are created equal. It all depends on the business that's backing them. Two consumer stocks help explain this line of thinking.
Coca-Cola (KO +2.06%) shares pay a dividend yield of 2.3%. Nike (NKE -0.03%) stock pays a dividend yield of 4.4%. Here's why only one of these dividend stocks is a better buy in October.
Both companies have remarkable dividend streaks
It's a good idea to first establish why these companies are elite at returning capital to shareholders. They both have incredible dividend streaks going right now.
Coca-Cola has raised its dividend for 64 consecutive years. That makes it a Dividend King, a business with at least 50 straight years of dividend increases.
That streak says nothing of the magnitude of the hikes. In the past decade, the beverage stock's dividend has grown by 51%.
Averytin News Financial update.