Secrets of an income investor

Our income specialist reveals the key tools of the trade.

Summary: Investors should be wary of buying stocks solely for the dividend yield, given so many factors contribute to a stock’s ability to provide stable income. Some stocks currently delivering mouth-watering dividends, such as BHP, RIO and the big banks, look set to reduce these in the future as commodity prices slide and regulation affects the banking sector. There are some great potential opportunities in this market, but first consider whether the stocks on offer have strong profits and cash flow and pay attention to the company’s payout ratio.

Key take out: Keep in mind that past strong dividends are no indication of future income – consider where each investment fits in your portfolio and risk profile before committing.

Key beneficiaries: General investors. Category: Shares.

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