Dividends4Life: A quick payback on dividend stocks

A quick payback on dividend stocks

Posted by D4L | Sunday, August 22, 2010 | | 0 comments »

The dividend payback period is the time it takes for an investor to recoup his or her investment in a stock through dividends alone. Say you bought a $50 stock that pays $2 in dividends annually. Assuming no dividend growth, it would take 25 years for you to get your $50 back through dividends alone (and you would still own the stock, of course).

If the dividend grows – as it should, if you’re investing in good companies – the payback period will be shorter. The payback period is determined by two factors: the current yield, and the projected growth rate of the dividend. The higher the yield, and the faster the dividend grows, the shorter the payback period.

Source: Globe and Mail

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