Dividends4Life: What’s Wrong With A High Dividend Yield?

What’s Wrong With A High Dividend Yield?

Posted by D4L | Tuesday, September 18, 2012 | | 0 comments »

What’s the point of investing in dividend stocks if it’s not to earn high dividend yields? The main appeal of investing in dividend stocks is definitely to build a passive source of income. Too often, low dividend yield stocks are dismissed to the profit of high yield dividend stocks. Investors are often greedy and look at short term income. Most dividend stocks are paying a dividend yield between 2% and 4%. In my own terms, stocks paying higher than 4% are called high yield dividend stocks.

Are you part of those who have fallen into this dividend trap? We call the high yield dividend stocks a dividend trap as many investors buy these stocks for the yield but don’t look at the fundamentals. Therefore, they are receiving high dividend payouts, but the underlying value of their investment is melting down faster than a GI Joe in the microwave. Warning: it’s not because a dividend is higher than 4% than it’s automatically a dividend trap…

Source: Guru Focus

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