This article explores the implications of dividend increases for investors, analyzing both the potential benefits and risks associated with this financial strategy.
Dividend increases are not always a positive event, as some companies may use funds intended for debt reduction or reinvestment to boost shareholder payouts. However, dividend increases generally signal business growth and a willingness to share profits. Tom Connolly, a dividend investing expert, highlighted this trend in his 2024 summary of 24 stocks. The average dividend growth for these stocks was 5.3%, outperforming the 1.9% inflation rate. Some companies, like Canadian Tire Corp.
, showed notable dividend increases despite challenging economic conditions. Rising dividends can drive share price increases, leading to lower dividend yields. Conversely, yields and share prices move in opposite directions. Connolly observed that 17 stocks on his list experienced price increases recently, while seven others faced investor disfavor, particularly BCE Inc., whose high dividend yield (around 11.5% in early January) reflected concerns about its performance and dividend sustainability.
DIVIDENDS STOCK MARKET INVESTING CANADIAN TIRE CORP BCE INC
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