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. Dividend

    A distribution of a portion of a company's earnings, decided ...
  2. Income

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

    An investing strategy that consists of buying the 10 DJIA stocks ...
  4. Income Fund

    A type of mutual fund that emphasizes current income, either ...
  5. Real Estate Investment Trust - ...

    A security that sells like a stock on the major exchanges and ...
  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 >>
  2. How do I find the information needed for input into the Dividend Discount Model (DDM)?

    Analysts and investors should utilize a company’s financial statements, stock information websites and any number of analysis ... Read Full Answer >>
  3. What options strategies are best suited for investing in the aerospace sector?

    The best options strategies for investing in the aerospace sector exploit the sector's volatility and propensity for big ... Read Full Answer >>
  4. Where can I find a good compound interest calculator free on the Internet?

    A number of free online compound interest calculators are offered online. One of the best is available through Pine Grove ... Read Full Answer >>
  5. What options strategies are best suited for investing in the Internet sector?

    The long straddle and long strangle options strategies enable investors to capitalize on the Internet sector's volatility. ... Read Full Answer >>
  6. How many attempts at the Series 7 exam are permitted?

    The National Association of Securities Dealers (NASD) has not placed any limits on the number of times you can attempt to ... 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. Fundamental Analysis

    Explaining the Geometric Mean

    The average of a set of products, the calculation of which is commonly used to determine the performance results of an investment or portfolio.

You May Also Like

Hot Definitions
  1. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  2. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  3. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
  4. Unsystematic Risk

    Company or industry specific risk that is inherent in each investment. The amount of unsystematic risk can be reduced through ...
  5. Security Market Line - SML

    A line that graphs the systematic, or market, risk versus return of the whole market at a certain time and shows all risky ...
  6. Tangible Net Worth

    A measure of the physical worth of a company, which does not include any value derived from intangible assets such as copyrights, ...
Trading Center