Investing in dividend yield stocks
Dividend yield is a ratio, which divides the dividend paid out by a company with the current market price. For instance, if a company pays out Rs 5 per share as dividend and its current market price is Rs 55, its dividend yield is about 9 per cent (Rs 5 / Rs 55 x 100). Companies, which offer high dividend yields, are usually ‘value’ companies, which ‘value investors’ look for. These companies have strong fundamentals and good potential, which the market has yet to recognize. When the market recognizes the worth of these companies, their dividend yields fall because of rise in their market prices. They, then offer a significant amount of capital appreciation.
|