The Importance of Rising Income

Stocks with a history of paying and increasing dividends, and an expectation to continue this pattern, offer what’s called rising income. You can own these stocks individually or in a mutual fund that invests in these companies. These are often called “growth-and-income” funds. When a company raises its dividend, it can often be interpreted to mean that management is sending a signal that it expects continued growth in the business.

Income Tomorrow
We believe investors would be better off focusing on the growth of the companies in which they’re investing, rather than their daily stock price changes. The best measurement of a growing business isn’t the short-term stock price movements; it’s the long-term growth rate in that company’s earnings and dividends.

In the short run, prices of rising income investments fluctuate more than fixed-income investments. At any time, even a quality portfolio of equities can drop in value by 20% or 30% as the prospects for the economy change. Even greater declines can occur: On six separate occasions since 1926, investors in the stock market would have lost nearly half (or more) of the value of their investment.

In addition, dividends can be reduced at any time. At times, severe price declines and dividend reductions can make stocks very uncomfortable to own. Although past performance does not guarantee future results, over the long term, investors have generally earned a higher rate of return and a growing stream of dividends.

Contact your financial advisor today about investments that offer rising income for your portfolio.