Dividend yield is a financial ratio that indicates how much a company pays out in dividends each year compared to its share price.
The dividend yield is one of the important ratios to calculate for dividend stocks. It is calculated as the total annual dividends paid per share, divided by the current stock price. Movements in the stock price will change the dividend yield. When you’re looking for income-producing stocks, dividend yield is typically your most important consideration. The best companies to invest in for a high dividend yield have strong positions in healthy industries. They also incorporate strong management that makes the right moves to remain competitive in changing marketplaces.
Dividend yields are a sign of investment quality. Some good companies reinvest profit to spur growth instead of paying dividends. But fraudulent and failing companies are hardly ever dividend-paying stocks. So if you only buy stocks that pay dividends, you’ll automatically stay out of almost all the market’s worst stocks.
For a true measure of stability, focus on those companies that have maintained or raised their dividend yields during a recession or stock-market downturn. That’s because these firms leave themselves enough room to handle periods of earnings volatility. By continually rewarding investors, and retaining enough cash to finance their businesses, they also provide an attractive mix of safety, income and growth-and are a big part of a successful long term investment strategy
High dividend yields can be a warning sign, however
When looking for high dividend stocks, you should avoid the temptation of “reaching for yield.” That is, choosing investments purely because they offer a high current yield. That’s because a high yield may signal danger rather than a bargain, if it reflects widespread investor skepticism that a company can keep paying its current dividend. Dividend cuts always undermine investor confidence, and can quickly push down a company’s stock price.
While a high-and safe-yield dividend is generally favourable, be aware that it is only one of many indicators that we look for in a good stock. You need to look at the big picture, so you get a realistic view of a company’s long-term prospects. As well, at TSI Network, we recommend our three-part Successful Investor strategy:
Invest mainly in well-established companies;
Spread your money out across most if not all of the five main economic sectors (Manufacturing & Industry; Resources & Commodities; Consumer; Finance; Utilities);
Downplay or avoid stocks in the broker/media limelight.
Utility investments typically benefit from stronger economic activity, and a top Canadian utilities ETF will let you take advantage of this—if you watch for low fees and sound stock holdings
Utility stocks are shares in companies that provide electric power, telecommunications, pipeline services and so on… Read More
The best time to buy dividend-paying stocks is when you find companies offering sustainable dividends and ready to survive periods of adversity before going on to thrive when conditions improve
We think investors should put the bulk of their investment portfolios in high-quality, mostly dividend-paying stocks… Read More
Use these key tips to learn how to do dividend investing successfully to pick the best investments with the least amount of risk
Top-quality stocks tend to lose less of their value in market setbacks. They also tend to bounce back nicely when conditions improve. These… Read More
Learning how to get started investing in the stock market is easier when you take the Successful Investor approach and focus on building a diversified portfolio of high-quality stocks
If you’re ready to learn how to get started investing in the stock market—or for that matter,… Read More
Understanding the ins and outs of how to invest in dividend stocks in Canada will set you up for powerful returns
At TSI Network, we feel that a long-term record of a stock paying dividends gives investors a measure of safety. Dividends, after all, are much… Read More
Look for companies with a strong hold on their market, a history of sustainable dividends, and more when trying to find the best Canadian blue-chip stocks that pay high dividends
Investors new to us always ask for the best Canadian blue-chip stocks that pay high dividends… Read More
Some of the highest dividend-paying stocks on the market can be unexpectedly risky
Before we begin, the best Canadian dividend stocks respond to tough economic times by doing their best to maintain, or even increase, their payouts. That may or may not make them the highest… Read More
A: iShares Core MSCI Canadian Quality Dividend Index ETF, $23.46, symbol XDIV on Toronto (Units outstanding: 30.4 million; Market cap: $713.2 million; www.blackrock.com/ca), tracks the MSCI Canada High Dividend Yield 10% Security Capped Index.
This index aims to invest in Canadian stocks with above-average dividend yields… Read More
Investors interested in dividends should only buy the highest-yielding Canadian dividend stocks if they meet these criteria, but don’t have these risk factors.
Dividend yield is the percentage you get when you divide a company’s current yearly payment by its share price. When looking for the… Read More
High-yield Canadian stocks are sought after by savvy investors, but sometimes the anticipation of a dividend cut is what gives some of them their above-average yields
In this country, high-yield Canadian stocks are often a key part of an investor’s portfolio, but at the same time,… Read More
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