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Monday, 1 March 2010

High Dividend Yield Stocks? - Part 2

High Dividend Yield Stocks?

How does the high yield came about?

1. The high yield came from the company paying 90% of its earning as stock dividends. With little retained earning, it is harder for the company to grow itself using internal resources.

2. The high yield came from the company paying out less than 60% of its earning as stock dividends. The company has retained some of its earning either as financial cushions or building up its internal resources for its future growth.

Do you prefer 1 or 2?

2 comments:

  1. I like no 2.

    Dividend stock is not really for me. I prefer the stock to rise instead

    ReplyDelete
  2. Me too.

    Dr Michael Leong is a private investor who focuses on investing long term in selected stocks and shares has this advice in one of the chapters in his book: "Your First Million" on buying stocks based solely on "dividend yield" and he doesn't think that is the right way.

    Capital appreciation is far important than high dividend yield. Go and read this chapter to find out more.

    I also love dividend play stocks but I treat the dividend as safety net if the stock price falls temporary but not as a buying decision. Technically on chart-wise, I must see that the stock price has the probability of moving higher before considering it in the watch-list

    ReplyDelete

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