Stock Market 101 by Michele Cagan

Author:Michele Cagan
Language: eng
Format: epub
Publisher: Adams Media
Published: 2016-11-04T00:00:00+00:00

Tracking Dividends

Before buying a stock for the dividends it’s paying today, take a look at the dividends it’s paid in the past. Compare the current dividend with the dividends paid over the past five years. Shrinking dividends may indicate plans for expansion; when a company’s primary goal is growth, dividends may be small or nonexistent. To decide if a specific dividend stock makes sense for your portfolio, it’s a good idea to compare it to other dividend stocks using the dividend yields.

The dividend yield converts the dollar value of an annual dividend (whether it’s paid in cash or shares) into a percentage, allowing you to see the return rate. To compute the dividend yield, divide the annual dividend per share by the stock’s share price. For example, if a corporation pays out a dividend of $0.50 per share, and the stock is trading at $25 per share, the dividend yield would equal 2% (0.50 ÷ 25 = 0.02).

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