Dividends are portions of profits that companies share with investors on a regular basis, complementing potential returns from share price growth. Some companies have a long history of paying and increasing dividends, and are referred to as dividend aristocrats.
However, chasing yield can lead to investments in companies that can’t sustain dividend payments, known as dividend traps. Forward-looking assessments of financial health—including using a company’s Distance to Default score—are crucial to the durability of dividend pay-outs.
