What is an income stock?

An income stock usually pays regular dividends to its shareholders. Companies issuing income stocks are usually well-established companies with strong financial performance. These companies are usually found in mature industries, for example, the utility industry. As a result, income stocks are less volatile than the overall stock market and tend to offer steady dividends.

Compared with growth stocks, companies issuing income stocks are less likely to reinvest their earnings into research and development, thus generating higher dividend yields. On the other hand, companies issuing income stocks have fewer chances to expand and grow at a fast pace.

• See below for a brief comparison of income stock and growth stock.