Dividend Yield - Understanding Dividend Yield

Many people think they know how the stock market operates

, but they usually have a very simplified understanding of the actual processes that drive the values of companies up and down. It is common knowledge that you can gain, or lose, a lot of money on the stock market; however, many people don't understand the terminology and the processes that go into determining whether shareholders will ever see a penny of the profits that a company brings in. If you are interested in making investments that will also be profitable for you, it's time to learn a little bit more about dividend yield and how it is calculated.

The first thing that you have to understand is that just investing in some public stocks on the stock market isn't going to guarantee that you get a big fat check in the main once a month without having to do anything. Not all stocks are valuable in the same way, and it is only dividend investing that actually shares a portion of the company's profits with those that have invested their money in it. When you invested in dividend stocks, you are in the best position to receive an attractive dividend yield, which is an actual percentage of the company's profits divided amongst its shareholders.

Those investors that are interested in seeing how much money their stock investments are actually earning them would do well to learn how dividend yield is calculated. You can find out the yield of any dividend stock simply by dividing the annual dividends per share by the price of the share. It is important to be able to do this math for yourself to avoid getting sucked in by ratios that sound like they will be good for your portfolio, but are not as attractive when you really investigate the amount that you stand to make.

People invest in the stock market for many different reasons, and the ones that are interested in maintaining a portfolio with consistent cash flow will be interested in those stocks that offer the highest dividend yield. It's important to be wary of companies that seem to be offering payout ratios that sound too good to be true, because they often are. Most investment experts recommend that you stay away from any company offering a payout ratio of over sixty five percent.

Are you ready to get started finding out more about dividend yields and how to make them work for you? Don't wait, get started today!

by: Troy Truman

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