Why companies that cut their dividend can be attractive income investments

(Apr 24): It may seem counterintuitive but companies that have cut their dividends can be good sources of future income.

An important part of income investing is receiving dividends. A dividend is the portion of a company’s profits that is returned to shareholders.

The payment of dividends is an incentive to own shares in stable companies. Often, companies paying attractive dividends will be those that no longer benefit from reinvesting their profits, whereas companies with significant growth opportunities tend to use their profits to grow the business.

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