Dividend investing can provide passive income, but it’s important to consider dividend sustainability. A history of stable and growing dividends can signal financial resilience, while assessing a company’s competitive strength, cash flow and debt levels is also important.
Unsustainable payouts can put an investor’s income stream and principal at risk, resulting in dividend cuts, share price depreciation or even bankruptcy. Avoid “dividend traps” by screening for indicators of financial distress.
