Investing for Beginners .EU, investing

investingforbeginners.eu Wealth may be an excellent thing, for it means power, and it means leisure, it means liberty.
James Russell Lowell

Investment Dictionary


Browse by search:

Browse by Letter: A B C D E F G H I J K L M N O P Q R S T U V W X Y Z All

Dividend Yield

 

A dividend yield is a ratio that shows how much investor gets dividends from the stock compared to its price. It is calculated dividing dividend per share by the share price. 

 

Dividend yield is important ratio for value investors, because if it is stable, dividend yield shows what steady cash flow investor can get from the investment. Usually dividends are more stable than stock prices, so it is easier for investor to predict income from dividends that capital gains on stock price increase. 

 

Dividend yield is some percentage, and for dividend stocks it can be 6%-10%. If the ratio is higher, then the question should be how long can it continue and what was the dividend payout ratio. If payout ratio was over 100% then definitely should raise doubts about sustainability of high dividend yield. Sometimes dividend yield can jump up if stock price decreases but profits don’t suffer.

 

Remember that dividend yield cannot be the only criterion for investment selection. Even stable companies may choose not to payout any dividends but use stock buybacks as capital return to shareholders form which can be more tax friendly. Many modern companies choose stock buybacks instead of high dividends, however also good practice is to combine these two methods.

 






Last searches: pretax cost of debt , inflation , management , Roa , decision , fixed asset turnover , share , property , bulgaria , DER , investing , investment , beginners , stocks