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Owning something with a yield of 7% or more may seem attractive. But it won't matter much if that yield isn't sustainable and the dividends can't grow over time.
Take Campbell's (NASDAQ: CPB) for example. The stock's yield rose to 7% recently before the company cut its dividend by 36% earlier this month. Yields don't matter if the company doesn't have the financial strength to support its payout.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »
The better strategy is to own durable businesses with healthy balance sheets that generate strong cash flows. This gives the company greater ability to continue paying dividends and increase them over time. That can give investors something very valuable for their portfolios: a long-lasting passive income stream that grows wealth over time.