Dividend Yields 101: How To Calculate And Use For Your Investment Strategy


Dividend yields can be an important tool for long-term investors looking to hedge downside risks or capitalize on upside potential.

By learning how to calculate and use dividend yield, investors can make better decisions and possibly improve the profitability of their investment portfolios.

Method of calculation: Divide the annual dividend per share by the stock price to find the dividend yield. For example, if the current stock price is $50 and the annual dividend per share is $1, the dividend yield is 2%.

Investing in stocks with high dividend yields is an efficient way to protect yourself against downside risk.

Additionally, high-yield stocks are typically less volatile than low-yield stocks, so they are often considered a safe investment.

for example, Kinder Morgan Company KMI It offers a dividend yield of 5.9%. The stock held up well for a historically volatile market in 2022, rising 14% against a 19.2% decline. SPDR S&P 500 ETF Trust spy.

Want to know how to calculate how much Kinder Morgan stock you need to own to get a monthly dividend of $100? It’s easy.

Also Read: Did Someone Say Dividends? Here’s How Much Of These Tech Stocks You Need To Earn $100 A Month

Kinder Morgan’s dividend yield is 5.9%.

Use this formula to determine how many shares you need to buy to earn $100 per month: (100 x 12) / (0.059 x price per share).

At a current stock price of $18.83, an investor would need to own $20,338 worth of Kinder Morgan, or 1,080 shares, to earn a monthly dividend yield of $100.

why it matters: High-yield stocks typically pay out the majority of their earnings in dividends, providing investors with a steady stream of income even when stock prices are falling.

On the other hand, investors can take advantage of dividend yields to capture upside potential by investing in stocks with lower yields but future growth potential.

These stocks tend to reinvest most of their earnings back into the business to drive growth, which can increase the potential for capital appreciation.

READ NEXT: 10 Highest Yielding Dow Jones Stocks for 2023

Photo: Jack_the_sparrow via Shutterstock



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