Forget High-Yield Traps: Coca-Cola Is the Best Dividend Stock
Durability and proven profit growth matter at least as much in the long run.
Overview
Income investors obviously love high dividend yields. After all, the bigger the yield, the greater the cash flow from that particular position.
After nearly three decades in the investment business, however, I know all too well that bigger dividend yields are only part of an income stock's story. If the underlying dividend payment doesn't grow or if the stock in question is likely to lose value rather than gain ground, the solution to your income problem is offset by the creation of another. I've heard such tickers sometimes called yield traps -- stocks that seem attractive due to their sizable dividend yield (frequently resulting from a steep sell-off) but often end up underperforming in other ways, leaving their owners unsure of what to do once they're in a position.
Details
As unappealing as the idea may be on the surface, I'm firmly convinced that sometimes the smartest long-term decision an income-minded investor can make is stepping into a dividend name with a modest entry yield, but a track record of strong net growth -- by all measures -- that will make this investment worth its seemingly slow start. And one of the best of these choices right now is beverage behemoth Coca-Cola (NYSE: KO).
Source
Originally published at www.fool.com.