What is Dividend Yield? | Investing 101

TL;DR

This video explains the concept of dividend yield, how to calculate it, and the risks associated with it. It also discusses five dividend investing strategies for solid returns.

Transcript

I’m sharing an easy explanation to the question, “What is Dividend Yield?” using Apple dividends and some of the biggest risks to dividend stock investing. I’ll not only show you how to calculate the dividend yield quickly but reveal five dividend stock strategies for higher returns without the risk. We’re talking dividend yield today on Let’s Talk... Read More

Key Insights

• 🧑‍🏭 Dividend yield is a popular measure for investors seeking cash returns, but it should not be the sole determining factor for investment decisions.
• ✋ High dividend yield can be a result of falling stock prices or risky financial situations for a company.
• ✋ Investing in monthly payers can provide regular cash flow and potentially higher yields, but it may also expose investors to certain business types.
• ❓ Dividend Aristocrats, with a history of consistent dividend increases, have outperformed the market and demonstrated stability.
• 🚕 REITs and MLPs offer tax advantages but require careful analysis due to their unique financial structures.
• 💐 Calculating metrics like price-to-distributable cash flow for MLPs and funds from operations for REITs is essential for accurate valuation.

Questions & Answers

Q: How can I calculate the dividend yield of a stock?

To calculate the dividend yield, divide the annual dividend by the current stock price. However, keep in mind that the dividend yield changes with stock price fluctuations.

Q: Why is it important to consider stock price trends when looking at dividend yield?

Stock price trends affect the dividend yield. If the stock price falls and the dividend remains the same, the yield increases. Conversely, if the stock price rises without a dividend increase, the yield decreases.

Q: What are the risks associated with high dividend yield stocks?

High dividend yield stocks may indicate a falling stock price or financial troubles for the company. There is a possibility that the company might cut dividends to conserve cash.

Q: How can investing in monthly payers benefit investors?

Monthly dividend stocks provide regular cash flow, making it easier to plan for expenses. Additionally, the median yield of monthly payers is over 8% annually, offering higher potential returns.

Q: What is a Dividend Aristocrat?

Dividend Aristocrats are companies listed on the S&P 500 index that have increased their dividend payments for at least 25 consecutive years. They have shown to outperform the market with less volatility.

Summary & Key Takeaways

• Dividend yield is the cash return on investment that an investor receives on a yearly basis. It is important to calculate it based on the annual dividend payment and the current stock price.

• High dividend yield should not be the sole consideration when investing in stocks. It is crucial to analyze the stock price trends and the company's financial health.

• Five dividend investing strategies discussed in the video include investing in monthly payers, Dividend Aristocrats, REITs, MLPs, and diversifying across different sectors.