High Dividend Yield Stocks? - Part 3
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?
If you choose 1, then the story goes like this:
Father A works very hard and collect his salary from his boss. When he reaches home; he distributes almost all of his pay to wife and children and let them decide how they should spend their money. Father A has very little money left to invest and is unable to build up his net worth.
Father B works very hard and collect his salary from his boss. When he reaches home; he distributes half of his pay to wife and children and let them decide how they should spend their money. Father B then invest the other 50% wisely and slowly build up his net worth.
Who you want your father to be? Father A or Father B
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