There is no one right of passage that makes a stock mature. Instead, the development of a stock depends on features such as consistency, history and leadership. A company's ability to demonstrate these characteristics will determine whether or not a stock is mature. Once a stock qualifies as mature, it has the potential to offer investors stability, income and steady returns, although the stock market offers no guarantee that investors will receive these benefits.
One of the risks of investing in dividend stocks, which are the stocks of companies that use a portion of their earnings to reward shareholders with quarterly cash distributions, is that the income will come to an abrupt end. That risk lessens when investors choose mature dividend stocks, which are companies that are no longer dependent on their quarterly income to pay for current operational needs. Mature dividend stocks that do not rely on quarterly profits for operations are more likely to maintain their dividend distributions to investors.
Companies that have surpassed the emerging growth stage become mature. An emerging stock is a company that has not fully reached its growth potential, while a mature stock is likely to have already experienced its fastest-growing days. It becomes less economical for mature stocks to continually expand their businesses -- especially during times of an economic slowdown. Nonetheless, although mature stocks tend not grow as quickly as emerging companies, they do not necessarily stop growing altogether.
Earnings and Cash Flow
When a company continues to produce earnings that satisfy expectations in addition to earning steady cash flow, which represents the money that is left after expenses, the company has reached a level of maturity. Financial performance is a key factor that drives stock prices, and mature stocks provide some stability because by consistently increasing earnings and cash flow, companies are less likely to be affected by the volatility, or extreme price swings, that the stock market generally demonstrates.
It is possible for a mature stock to experience difficulty and lose its market status. In 1997, financial institution Citigroup was recognized as a component in the Dow Jones Industrial Average, which is an index that represents trading in the stock market's "blue chips," or leading stocks. In 2006, Citigroup was trading at a new high price of nearly $60 but a year later the economy entered a recession, and the stock price fell until it was worth only pennies. As a result, Citigroup lost its status not only as a mature stock but also its position as a component in the Dow when it was removed from the index in 2009.
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