Dividends, who doesn’t love ’em?
Dividends can be a form of passive income to supplement our salary or even sustain our lifestyle when we have retired.
However, not all dividends are made equal.
A company with a lower dividend yield can sometimes be a better dividend share than a company with a higher dividend yield.
A high dividend yield, as compared to its peers, may mean that the company is fundamentally weak and thus, has a depressed share price. On the other hand, a low dividend yield does not mean that the company is “lousy”. It may mean that the company’s share price has run up a lot due to its strong market position.
Instead of looking at dividend yields alone, we should focus on three other aspects of a company if we are investing in it for its dividends. Those factors are:
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