Dividend Paying Stocks And Why You Should Be Using Them

Dividend Yield

Understanding how to compare dividend-paying firms can let us see how dividends can help us increase our returns. A high dividend yield is commonly thought to be the most important metric; however, a yield that is significantly higher than that of other stocks in an industry may mean a depressed price rather than a good dividend (dividend yield = annual dividends per share/price per share). As a result of the falling stock price, a dividend cut or the elimination of the dividend may be on the horizon.

The most significant indicator of dividend power is not a high dividend yield, but rather a high company performance,

which you can learn about by looking at its dividend history, which should grow over time. Looking for such companies can be very rewarding if you are a long-term investor.

Dividend Payout Ratio

The dividend is a very important metric. if a company’s dividend payout ratio remains constant, say at 4%, the company expands, the 4% represents a greater and larger sum. (For example, 4% of $40, which equals $1.60, is higher than 4% of $20, which equals 80 cents.)

Special Considerations

Dividends alone would have earned you a 48 per cent annual return on your initial investment by 2004!

Final Thoughts

Many people don’t look at dividends the way they should be. A lot of the time they are viewed just as a nice bonus on the massive return you will make. But seeing your dividend payouts compound over time can be a nice sight indeed!

  • Dividend yield and dividend payout ratio are two important metrics to consider for investors.
  • Dividend ratios normally growl slowly. But often investors still rely on them
  • When it comes to reinvesting dividends, the power of compounding can be a very profitable technique.

When taking dividends into consideration the investor is thinking for the loin-term. Dividends are one of many bonuses to think about when investing long-term but there are many more. Take a look.

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