![]() But it does not tell you what you're earning based on your original investment or the income you can expect to earn in the future. Yields for all dividend-paying stocks are reported regularly in newspaper stock tables and on financial websites.ĭividend yield increases as the price per share drops and drops as the share price increases. If you own dividend-paying stocks, you figure the current dividend yield on your investment by dividing the dividend being paid on each share by the share's current market price.įor example, if a stock whose market price is $35 pays a dividend of 75 cents per share, the dividend yield is 2.14% ($0.75 ÷ $35 =. Copyright © 2003 by Houghton Mifflin Company. Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. ![]() A common stock that has a dividend yield higher than the yield on long-term bonds indicates a need for caution. ![]() The high dividend yield stemmed from investors' expectations that the dividend would have to be reduced, perhaps substantially, because of lower earnings and cash flow related to the troubled nuclear plant. The reduced stock price of $12 7/ 8 produced a dividend yield of 13.7% based on the utility's quarterly dividend of 44¢ per share. The firm's stock price, reflecting investor concern about the escalating costs, had declined 50% since the beginning of the year. In the summer of 1996, Northeast Utilities was facing rising expenses as a result of shutting a nuclear power plant located in Connecticut. For example, a very high dividend yield is almost certainly a sign that the dividend being paid is likely to be reduced or even eliminated. ![]() Case Study While dividend yield can be an important measure of the current income you are likely to receive from ownership of a particular common stock, it can also signal other possibilities, some of which aren't so good. ![]()
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