Dividends4Life: Dividend Myths, Part I

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Dividend Myths, Part I

Posted by D4L | Sunday, August 28, 2011 | | 0 comments »

The single biggest misconception about dividend investing is that rising or falling stock prices are directly linked to the dividend paid by a company. Investors, particularly those in retirement, are often pleasantly surprised to learn that even though stock prices might be falling their incomes from stock holdings are unchanged or even rising.

Clearing up the confusion is easy. Dividends are declared and paid by a company on a per share basis, not on a yield basis. For example, let's look at McDonalds (MCD). MCD currently pays a dividend per share of $2.44. At today's price of $85.61 per share, that $2.44 dividend equates to a current yield (dividend/price) of 2.8%. Whether the stock goes up down or sideways, the dividend will stay at $2.44 per share until the company changes it. In this case MCD has raised their dividend for the last 38 consecutive years.

Source: Rising Dividend Investing

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