Beware of focusing an investment decision on "yield." In this piece, we want to highlight that investing in high dividend yield stocks - without considering the valuation - is probably a BAD idea. We've noticed that many market participants point to the historical performance of high dividend yield investing as a way to outperform the benchmarks. Well, it turns out that this is true, but misleading. Jack and I published a paper on the subject of high-yield strategies a few years ago. A copy of the paper can be found here. The bottom line is as follows: "High dividend yield stocks do not reliably earn above-average risk-adjusted returns. More complete measures of shareholder yield, which account for net share repurchases, perform better."
If you are venturing into high dividend yield funds in the hopes you will earn some extra income, you might be in for a nasty surprise. As Ben Graham discussed in the past, intelligent investing is about buying stocks with a margin of safety... he didn't suggest that investors focus on high-yield stocks. Let's repeat: value investing is about buying stocks with a margin of safety. In other words, focus on cheap stocks where expectations are lowest and fundamentals are sound. Put differently, buy value investing funds that focus on cheap, high-quality firms, not dividend yield funds that buy expensive, relatively low-quality firms.
Source: Seeking Alpha
Related Articles:
- Dividend Growth Stocks With A Defined-Benefit Pension
- 7 Higher-Yielding Stocks With A Low Price To Book
- Don't Forget: Buy And Hold Is Not Buy And Forget
- 5 Stocks With Strong Dividend Growth Metrics
- Are Defense Stocks Good Defensive Stocks?
Investing In High Dividend Yield Stocks: A Sucker Bet?
Posted by D4L | Thursday, April 23, 2015 | ArticleLinks | 0 comments »________________________________________________________________
Subscribe to:
Post Comments (Atom)
Dividend Growth Stocks News
~
Popular Posts Last 30 Days
-
If you're worried about inflation rearing its ugly head next year, you should probably worry about more likely catastrophes, such as bei...
-
As a relatively new blogger, the one thing that has stood out in my mind is the number of Canadian bloggers in the areas that I am most inte...
-
When a company pays a dividend, it's a good thing for shareholders. When a company consistently pays a dividend every quarter, it's ...
-
We screened our 24/7 Wall St. dividend equity research database and found 5 stocks that combined can generate over $3,000 of annual passive ...
-
The stock market has been on an upward path of late, with some of the most prominent stocks hitting astronomical highs. The dividend yield o...
-
My top financial goal is to eventually become financially independent. The foundation of my strategy is to make investments that produce an ...
-
Dividend growth stocks can be incredibly attractive investments if you crave recurring income. As these types of stocks raise their dividend...
-
In my opinion, there are three criteria investors should consider when evaluating a particular stock for their portfolio. The first is histo...
-
In this article, we discuss 5 best March dividend stocks to buy. If you want to read our detailed analysis of dividend capture strategy and ...
-
As the broader stock rally broadens to some of the more “boring” corners of the market, it’s the higher-yielding dividend plays that could s...
0 comments
Post a Comment
Post a Comment
Note: Only a member of this blog may post a comment.