Inspect Earnings and Monitor Dividends

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Inspect Earnings and Monitor Dividends

Inspect earnings

Earnings estimates made by Wall Street analysts are important to the prices of your stocks. Each quarter, companies try to exceed the estimates that analysts have made. If companies exceed expectations, they’re usually rewarded with a pop up in their stock price. If companies fall short of expectations—or sometimes if they only meet expectations—their stock prices can take a beating.

Those in the know advise not relying too heavily on whether or not companies meet or beat quarterly estimates; a company that misses estimates can still have great growth prospects. Conversely, a company that exceeds expectations may face roadblocks ahead.

Nevertheless, quarterly earnings figures are useful. A company that consistently exceeds expectations quarter after quarter is doing something right. But a company that has consistently fallen short of estimates for several consecutive quarters probably has significant problems.

Monitor dividends

Dividends play an important role in many portfolios. They’re a sign that corporate management is committed to shareholders, and companies tend to be reluctant to cut them. If you’re nearing retirement, you may look to regular dividend payments to help supply you with income for living expenses. And since stocks with high dividend yields tend to be less volatile than non-dividend-paying names, they can provide good balance for anyone’s portfolio.

If you own stocks that pay dividends, monitor that payout. You want to see a dividend that’s stable, or growing. It’s virtually always a bad sign when a company cuts or even eliminates its dividend.