Looking for income? MarketWatch Sees 11 S&P 500 Stocks With High, Well-Covered Dividends
Ford, Pfizer and Verizon are among the 11 stocks selected by a criterion that measures whether free cash flow covers expected dividends.
BY THE X-TRADER NEWS NEWSROOM · REPORTING FROM MARKETWATCH · 2 MIN
Those looking for income on the stock market usually start with the percentage paid in dividends, but the real question is: can the company maintain this payment? According to MarketWatch, 11 stocks in the S&P 500 passed a test designed precisely to separate high returns from returns that appear well supported. Ford, Pfizer and Verizon are among those selected.
The criterion used was the coverage of expected dividends by the companies' free cash flow. In simple terms, free cash flow is the money left over after the company pays what it needs to maintain the operation and make its investments. When this money well covers the expected dividend, the distribution tends to depend less on new debt or the sale of assets.
The distinction matters because a high income can have two origins. It may reflect a generous profit distribution policy, but it may also arise when the share price falls and the percentage increases in the account, without the payment having increased. Therefore, the coverage filter works as a check on the accounts, and not on the appearance of the number.
For those who defend fiscal responsibility and less interference in the economy, the logic has a clear parallel: a company that pays with the cash it generates demonstrates discipline, while one that goes into debt to maintain distribution lives on a more fragile balance. The data available for this report is limited to the names mentioned and the selection criteria, without the yield values for each role.
It is worth remembering that the selection is from a specific list. It points out companies that passed a criterion, but does not tell the investor what to do with this information, and each stock carries risks specific to the sector and the balance sheet.
What changes for the investor
In immediate effect, the reading shifts attention from the isolated percentage to the coverage of the dividend by cash. If this way of looking gains ground, stocks with high yields but tight cash may start to be examined more cautiously, while those that show slack may attract the attention of those seeking recurring income. This does not guarantee any price movement, and the decision continues to require analysis of each company, the investment period and risk tolerance.
Automatically translated from Portuguese.
