• Are earnings consistent? Will they be able to cover the dividend even if they have an off year?
• How many years has the company increased its dividend?
• Did they increase their dividend even during the last bear market?
• Did they increase their dividend even during the Great Recession of 2008-2010?
As we can see from the track record of the Dividend Aristocrats, the most reliable dividend-paying stocks have generated consistent dividend increases every year, in all kinds of economic conditions, for decades.
5. Overweighting Bonds In Low-Interest Rate Environments
When interest rates are low, bond risk is at its highest. There’s nothing wrong with good-old-fashioned asset allocation. But when interest rates are low, bond prices are high, by definition. Upside is limited, and downside potential is significant.
Furthermore, unlike great dividend-paying stocks, bonds don’t increase their coupon payments every year. This is why bonds are referred to as fixed income.
Michael Morey is CIO and portfolio manager at Integrity Viking Funds.