What Are the Characteristics of Income Investments?
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What Are the Characteristics of Income Investments?
Income investments can be identified in several ways.
Things To Know
- Income investments make periodic payments to their investors.
- Large companies with substantial earnings may pay high dividends on a steady basis.
Periodic payments
The most obvious is that they make periodic payments to their investors. An investment is not deemed an income investment when it is issued. Instead, it is only called such by investors when it actually pays. Therefore, almost any investment can fit into the income category.
The issuing companies are often large
A stock that is income-oriented may be issued by a company that normally pays high dividends. Large companies with substantial earnings may pay high dividends on a steady basis. These companies are favorites of people who seek income. One reason that you may wish to use stock for income is because over years the dividend payments can increase with profitability of the company and with share appreciation.
Not all companies with substantial earnings pay high dividends, however. Some reinvest their earnings for future growth. When you are looking for an income-producing stock, be sure to study its history of paying dividends. A company’s past history of dividend payment is one sign that its stock is income-oriented. Shareholder reports and company earnings reports will give you information on dividend histories.
