Dividend Yield
Candlefocus EditorMature and well-established companies are the most likely to pay dividends. Companies that are in the utility or staples sectors, such as food and beverage companies, sually tend to have relatively higher dividend yields, as do Real Estate Investment Trusts (REITs), Master Limited Partnerships (MLPs) and Business Development Companies (BDCs). However, the dividends paid by these companies are subject to a higher rate of taxation compared to that of other companies.
It is important for investors to bear in mind that higher dividend yields do not always signify a better investment opportunity. Dividend yields may be lifted as a result of a declining stock price. This could mean that the company’s dividend payments are outpacing the firm’s stock price which could be a sign of danger and not necessarily a good investment.
In conclusion, the dividend yield percentage is a key metric of stock investing and can tell investors how much they can expect to get in terms of return from their dividend paying investments. It is important to note, however, that higher dividend yields do not necessarily point to a better investment opportunity and that the underlying company should be evaluated before investing in it.