

Q: What stock is guaranteed to keep paying a dividend?

A: Dividends are not guaranteed. Investors must be 100% clear on the fact that dividends, by definition, are up to the discretion of companies and can stop at any time.

Companies certainly make an effort to keep paying common stock dividends. Most companies are very reluctant to cut or halt dividends. And with some types of dividends, specifically preferred-stock dividends, a company must make up for any missed dividends if they're cut. But make no mistake: Companies can and do cut dividends, including companies with long track records of paying them.


If you're looking for a more secure form of income, that's what bonds are for. Bond interest payments aren't guaranteed either. But at least, the companies have a contractual obligation to pay the payments and bad things happen if they don't.

If you're looking to reduce the risk that your dividends will dry up, that's where owning a basket of dividend paying stocks can come in. Most of the major exchange-traded fund families offer ETFs that own baskets of dividend paying stocks. Vanguard, for instance, offers the Dividend Appreciation and High Dividend Yield ETFs. No, these dividends aren't guaranteed, either, but spreading over many investments reduces the risk a bit.

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