Income Stocks

Income Stocks – Types and Features

In stock market trading, if the stock pays regular dividends with a record of steady dividend growth is called an income stock.

Companies usually issue income stocks with stable cash flows and well-established financial infrastructure.

It’s also quite common for companies that issue income stocks to have long histories of success, a large market capitalization, and to operate at a mature stage in their growth curve.

Income stocks are often compared with value stocks. While income stocks pay out dividends at a high rate, value stocks are often trading at a price lower than the company’s fundamental value or the stock’s book value.

Investors generally invest in income stocks to get a stable cash flow from their investment without putting too much risk on their money.

Income stocks are generally considered less risky than other types of investments.

If you face any difficulty in understanding income stocks then feel free to mail us and talk to our experts.

What are the Types of Income Stocks?

Income stocks are considered to be less risky as compared to growth stocks.

Suppose a company is well established and has a consistent track record of paying dividends. In that case, it can be considered an income stock.

Income stocks are considered good for investors who want stability and regular stock trading returns in dividends.

Types of Income Stocks:

High Yielding Dividend Stocks

High yielding dividend stocks refer to companies with a long history of paying high dividend yields. 

These companies have a steady cash flow stream and can afford to pay higher dividend yields.

Low Yielding Dividend Stocks

Low yielding dividend stocks refer to those companies that payout low or moderate dividend yields.

Such companies generally have a stable financial position. They reinvest their cash flows into their business to expand and grow.

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Features of Income Stocks

Regular Dividends

Dividend-paying stocks are those whose payments are made by a company to its stockholders. Most income stocks pay dividends regularly, whether monthly, quarterly or annually.

The amount of each dividend payment can vary depending on the company’s profitability.

The total amount of dividends paid by a company over a given period is its dividend yield or dividend payout ratio.

Also, Read – 5 Smart Rules to Follow While Investing in Dividend Paying Stock

Low Risk

Income stocks offer lower risk than many other investments – they are usually large, well-established companies with long track records of paying stable or rising dividends.

Steady Growth Potential

Income stocks have the potential for steady growth through reinvesting their dividends into the business or using them for acquisitions.

Moderate Volatility

The price of income stocks tends to be less volatile than those of speculative growth stocks but more volatile than defensive shares (which pay lower yields and have less scope for capital gains).

Defensive in Nature

It has been found that income stocks are highly defensive in nature. They don’t fluctuate with the frequent changes in the market.

Minimum Capital Investment

Income stocks don’t reinvest their profits. Instead, they distribute most of their profits to the shareholders in the form of dividends. As a result, they lack a surplus fund for further investments.

Benefits of Income Stocks

These stocks provide stable dividends to shareholders as compared to other stocks.

Income stocks are less risky as they are less volatile than other stocks.

These are apt for those who have a low-risk appetite investment mindset viz students, non-income people, older people and more.

Companies that issue income stocks have a strong financial background and hence they provide stable dividends to their shareholders.

Companies that issue income stocks mostly come under the large-cap market.


Yes, it is good to invest in income stocks.

We would say that you should make sure you do not put all your eggs in one basket.

If you are investing for the long term, it makes sense to have a lot of different investments.

Income stocks are a great place to start when you begin investing as they are not too risky but offer a decent amount of risk.

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