Investors need to be careful and make sure they do more research beyond just looking
at the dividend yield of a stock.
One of the easiest ways to compare dividend stocks is to look
at dividend yields.
«You've just got to look
at dividend yields,» he said.
At dividend yields of 5 % and above, there is a distinct leveling off of their break - even points, eventually narrowing at 10 % yields to between roughly six and 10 years.
The key aspect of looking
at dividends yields is that the yield shouldn't be high because of a beating that the price of the stock has taken.
Manshu: Yes, you can't just look
at dividend yield, which is related to the stock price.
MANY COMPANIES DO N'T PAY dividends, so looking
at dividend yields won't necessarily tell you whether one stock is better value than another.
``... and so when you look
at the dividend yield based on the most recent dividend paid (which is always looking at the past) it will look high.
E.g. buyers of dividend stocks and preferred shares too often look only
at the dividend yield, and ignore the potential for capital gains / losses.
Analysts arrive
at the dividend yield ratio by dividing the total dividend payments paid per year by the market price of the stock.
In such a situation, it pays less to look
at dividend yields, and more at dividend growth, adjusted for ability of growth to be sustained.
Telus, which is expected to report on May 10, is currently trading
at a dividend yield of 4.4 % and has a long history of semi-annual dividend increases, with a seven - year compound annual growth rate of 11.4 %.
I had glanced
at dividend yields.
When I looked
at the dividend yield it seems to be not high in the first look.
At a dividend yield just north of 3 %, shares of Nucor look like a decent investment for those looking to bolster their retirement portfolios.
Say we value utilities at 11 times trailing earnings and
at a dividend yield of 6 %.
Some people look
at a dividend yield and mistakenly assume this will be their total rate of return, but that is not the case.
Not exact matches
But even
at that level the shares offer a substantial
yield (2.6 %), and the
dividend has been raised for 12 years running.
Take a look
at any retiree's portfolio and you'll see the same thing: it's filled with high -
yielding dividend stocks.
«Why shouldn't we look
at strong
dividend players, levered to the economy, in sound and important businesses that pay above market rate
yields?»
Berkshire Hathaway pays no
dividend at all, and Brookfield Asset Management has a paltry 1.52 %
yield.
First,
dividends are tiny; the
dividend yield is starting
at just 1.5 % because investors are paying an extraordinary $ 30 - plus for each dollar in profits.
At the same time, Canadian Tire Corp. has a valuation of $ 11.5 billion and earns $ 10 a share — and pays a
dividend yield of 2.14 per cent.
At 4 percent, its
dividend yield is the highest in all the semiconductor space.
Finally, look
at metrics such as price - to - earnings, price - to - sales and
dividend yields to see if markets are cheap or expensive.
Luciano Siracusano, chief investment strategist
at ETF and index developer WisdomTree (wetf), says the 1,400
dividend - paying stocks in the company's WT Dividend index now have average yields of about 3 %, twice the yield of 10 - year Tre
dividend - paying stocks in the company's WT
Dividend index now have average yields of about 3 %, twice the yield of 10 - year Tre
Dividend index now have average
yields of about 3 %, twice the
yield of 10 - year Treasuries.
Clorox (CLX)- Consumer Products name currently
yields just over 3 %, and has grown the
dividend at 5.6 %.
Kohl's (KSS)- Retailer, an Action Alerts PLUS holding, which has continued to flourish in the anti-retail environment,
yields 4.1 %, and has grown the
dividend at 13 %, while keeping the payout ratio below 50 %.
To achieve $ 10,000 in annual passive income
at the S&P 500's 2 %
dividend yield, you would need to invest roughly $ 500,000.
The
dividend, however, remains stable
at first and the current
dividend yield even climbs.
At current prices the
dividend yield works out to around 1.2 %.
General Mills (GIS)- Cereal name currently
yields 4.4 %, and has been growing the
dividend at a 9.5 % clip (5 year compound annual growth rate).
In the European market, the oil sector has a high
dividend yield of about 6 percent — the highest there is — which adds up to real value, says Nick Nelson, head of global and European equity strategy
at UBS.
At some point, provided that
dividend is safe and investors are convinced it is going to be maintained, the
dividend yield on the stock itself is going to be so attractive that it brings in buyers from the sidelines, people who otherwise can not stand to see the
yield right there in front of them without doing something about it.
Consider that the exact same $ 3 per share
dividend would be a 6 %
dividend yield if the stock were trading
at $ 50 per share instead.
THL Credit pays quarterly
dividends of $ 0.27 per share, giving TCRD stock a staggering annual
yield of 13.8 %
at the current price.
I plan on talking about
dividend stocks, where they are
at today and comparing them to 5 year
dividend yield averages.
At the start of the sustained rise in equity prices, stock
dividend yields exceeded the
yields on Treasury bonds and this was perceived as normal, partly reflecting the searing experience of the Great Depression.
There are a multitude of reasons as to why this occurs but it's a powerful enough force that many investors have done quite well for themselves over an investing lifetime by focusing on
dividend stocks, specifically one of two strategies -
dividend growth, which focuses on acquiring a diversified portfolio of companies that have raised their
dividends at rates considerably above average and high
dividend yield, which focuses on stocks that offer significantly above - average
dividend yields as measured by the
dividend rate compared to the stock market price.
In other words,
at a certain level higher bond
yields create real competition for stocks, particularly
dividend stocks, and put downward pressure on multiples.
Kick in the average 2.8 %
dividend yield since 1982, and you arrive
at the 33 - year total return since 1982 of 12.3 % annually.
With Group of Seven (G7) sovereign bond
yields at historically low levels, some income - seeking investors have turned to higher - volatility securities like
dividend - paying stocks in an attempt to capture additional income.
With rates
at historic lows, many investors have used high -
dividend stocks, rather than low -
yielding bonds, in pursuit of income.
However, with both the 10 - year Treasury
yield and the average
dividend yield for a company on the S&P 500 hovering around 2.35 %, that doesn't leave much in the way of real gains if inflation is running
at 2 % per annum.
In order to received $ 60k in annual
dividend income, I'll need a portfolio valued
at over 1.7 Mil that
yields an average of 3.5 %.
After taking a look
at the fund's low
yield and lack of consistent
dividend growth, I decided to sell all the shares.
Also, European equities appear to trade
at relatively cheaper valuations than U.S. equities and offer a higher
dividend yield.
I'd recommend
at least a small allocation to bonds or cash in the event that an unexpected expense comes up that over and above the
dividend yield (although you could always create your own
dividend by selling shares too).
This is a sneak peak
at all the high -
yield dividend stocks that we are currently evaluating for possible additions to our «Best Dividend Stocks&raqu
dividend stocks that we are currently evaluating for possible additions to our «Best
Dividend Stocks&raqu
Dividend Stocks» list.
Brian's monthly recommendations allow his clients to dollar cost average into highly rated stocks which are long term
dividend yielding winners trading
at temporarily depressed prices.