Income Stock

What is an 'Income Stock'

An income stock is 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.

BREAKING DOWN '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. Equity Income

    1. Dividend income that is earned through an investment in stocks ...
  2. Forward Dividend Yield

    An estimation of a year's dividend expressed as a percentage ...
  3. Indicated Yield

    The dividend yield that a share of stock would return based on ...
  4. Income Investment Company

    A money management firm whose primary investment goal is to generate ...
  5. Dividend

    A distribution of a portion of a company's earnings, decided ...
  6. Dividend Yield

    A financial ratio that shows how much a company pays out in dividends ...
Related Articles
  1. Markets

    Top Income Investing Strategies for 2016

    Dividend paying stocks and equity income funds are two ways to get yield out of your investments this year.
  2. Markets

    How to Get More Yield From Your Investments

    Yield seeking investors can boost the amount of income their investments generate through tweaking their portfolio of stocks and bonds.
  3. Investing

    The 3 Biggest Misconceptions of Dividend Stocks

    To find the best dividend stocks, focus on total return, not yield.
  4. Retirement

    High Yield Stocks Can Hurt Your Retirement Nest Egg

    High yield stocks can give you a handsome return, but for retirement investors the risk far outweighs the reward.
  5. Markets

    Dividend Yield For The Downturn

    High-dividend stocks make excellent bear market investments, but the payouts aren't a sure thing.
  6. Managing Wealth

    The Importance of Dividends in Your Portfolio

    Learn some of the primary reasons why dividends constitute a critical factor in the overall performance of a stock investor's portfolio.
  7. Managing Wealth

    5 Reasons Why Dividends Matter to Investors

    Learn five of the primary reasons why dividends are of significant importance for the overall performance of stock market investments.
  8. ETFs & Mutual Funds

    4 Dividend ETFs to Help Fund Your Retirement

    Investing in stocks that pay out dividends can be a smart way to establish a reliable income stream in retirement. Here are four low-fee dividend ETFs.
  9. ETFs & Mutual Funds

    The Best 8 Funds For Regular Dividend Income

    Here's a list of the top mutual funds which pay regular dividends, for frequent income.
  10. Investing

    High Dividend Stocks: 3 Things to Consider Before Buying

    Discover some of the risks involved in investing in high-yield stocks, and learn about some of the factors that you should consider before investing.
RELATED FAQS
  1. Which is more important - dividend yield or total return?

    Learn to distinguish between those times when dividend yield or total return is a more useful performance metric for a company's ... Read Answer >>
  2. What metrics should I evaluate when looking for high-yielding dividend stocks?

    Evaluate high-yield dividend stocks to determine if they are a good investment to produce steady income. Learn what questions ... Read Answer >>
  3. What is the difference between yield and dividend?

    Learn how to differentiate between dividend yield and dividend return, and see why dividend yield is the more popular rate ... Read Answer >>
  4. What size of annual dividend yield is typical of companies in the financial services ...

    Learn the importance of calculating the annual dividend yield and how income investors can use it to analyze companies in ... Read Answer >>
  5. Can dividends be paid out monthly?

    Find out if stocks can pay dividends monthly, and learn about the types of companies most likely to do so and how monthly ... Read Answer >>
  6. What utility stocks pay the highest dividends?

    Discover some of the utility stocks offering high dividend payouts and understand why dividend income is very important to ... Read Answer >>
Hot Definitions
  1. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  2. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  3. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  4. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  5. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  6. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
Trading Center