Income Stock

AAA

DEFINITION of 'Income Stock'

An equity security that pays regular, often steadily increasing dividends, and offers a high yield that may generate the majority of overall returns. While there is no specific breakpoint for classification, most income stocks have lower levels of volatility than the overall stock market, and offer higher-than-market dividend yields. Income stocks may have limited future growth options, thereby requiring a lower level of ongoing capital investment. The excess cash flow from profits can therefore be directed back toward investors on a regular basis.

Income stocks can come from any industry, but are most commonly found as companies operating within real estate (through real estate investment trusts, or REITs), energy sectors, utilities, natural resources and financial institutions.

INVESTOPEDIA EXPLAINS 'Income Stock'

Income stocks are sought by conservative investors who still want some exposure to corporate profit growth. They also have steady streams of revenue that allow for a high level of income payout to investors.

The ideal income stock would have a very low volatility (as the Beta would measure), a dividend yield higher than prevailing 10-year treasury bond rates, and a modest level of annual profit growth. Ideal income stocks would also show a history of increasing dividends on a regular basis so as to keep up with inflation, which eats away at future cash payments.

RELATED TERMS
  1. Income

    Money that an individual or business receives in exchange for ...
  2. Dogs Of The Dow

    An investing strategy that consists of buying the 10 DJIA stocks ...
  3. Dividend

    1. A distribution of a portion of a company's earnings, decided ...
  4. Real Estate Investment Trust - ...

    A security that sells like a stock on the major exchanges and ...
  5. Income Fund

    A type of mutual fund that emphasizes current income, either ...
  6. Growth Stock

    Shares in a company whose earnings are expected to grow at an ...
RELATED FAQS
  1. Why would a stock that pays a large, consistent dividend have less price volatility ...

    To understand the differences in volatility commonly seen in the stock market, we first need to take a clear look at exactly ... Read Full Answer >>
Related Articles
  1. Investing Basics

    Stock Basics Tutorial

    If you're new to the stock market and want the basics, this is the tutorial for you!
  2. Investing Basics

    The Power Of Dividend Growth

    Dividends may not seem exciting, but they can certainly be lucrative. Learn more here!
  3. Investing Basics

    The Alphabet Soup Of Stocks

    Are the countless stock categories leaving you puzzled? Here we help you sort through the confusion.
  4. Bonds & Fixed Income

    A Primer On Preferred Stocks

    Offering both income and relative security, these uncommon shares may work for you.
  5. Investing Basics

    How And Why Do Companies Pay Dividends?

    If a company decides to pay dividends, it will choose one of three approaches: residual, stability or hybrid policies. Which a company chooses can determine how profitable its dividend payments ...
  6. Options & Futures

    The REIT Way

    Ever considered investing in real estate? Read about the REIT and see if it's the investment for you.
  7. Fundamental Analysis

    Why Dividends Matter

    Seven words that are music to investors' ears? "The dividend check is in the mail."
  8. Markets

    Your Dividend Payout: Can You Count On It?

    We go over several telling factors that can help you answer this question and avoid losses.
  9. Investing Basics

    How Dividends Work For Investors

    Find out how a company can put its profits directly into your hands.
  10. Stock Analysis

    What’s The Highest Dividend-Paying Tech Stock?

    Technology stocks tended not to pay dividends, preferring to reinvest available capital back into their respective businesses to accelerate their growth.

You May Also Like

Hot Definitions
  1. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  2. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  3. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  4. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  5. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  6. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
Trading Center