What is more important – dividend yield or total income?


As the dividend yield and gross income are terms used to describe the performance of a stock over a certain period of time (usually one year), but they reflect different types of performance. Whether investors should focus on income, which includes dividend income, or the return is a controversial topic in the world of Finance. In truth, the relative importance of each dimension is likely to depend on your individual circumstances and investment horizon. This does not mean you have to neglect one in favor of another, it is reasonable to take into consideration when choosing investments.

The importance of dividend yield

Dividend is the part of the Company’s profit attributable to shareholders. It is a sign of clear financial health and confidence in the company, to pay dividends, which generally do not depend on the stock price. Dividend yield-a financial ratio that represents dividend income per share divided by price per share. For example, shares at a price of $100 per share that receives a dividend payment in the amount of $8 has a yield of 8%.

For long-term investors, dividends can be very powerful because they can be reinvested and used to purchase additional shares, i.e. the investor should not make his or her own resources to increase his or her stock. Other investors look for yield, to produce a stream of income from their investments. Although not entirely reliable, investments with fixed income such as bonds, dividend-producing stocks can be quite valuable in this way.

The output, however, can be misleading. Some enterprises continue to pay yields even when they are on short-term losses, while other companies pay gives too aggressive and not to reinvest profits sufficiently to support operations on the road.

The importance of a full refund

Comprehensive income, which is often called simply “return” it’s a very simple idea of how much investment has actually made to the shareholder. While the dividend yield only takes into account cash dividends total revenues interest, dividends and rising share prices among other capital gains. On the surface, this seems to provide a more comprehensive and therefore useful performance metric than dividend yield. However, to return the fully retrospective, and the value of shares may increase by a huge number of reasons. It is usually difficult to predict future investment performance from return of the stock than on its dividend yield.

What Is More Important?

The importance is relative and specific to each investor. If You are only interested in determining which best shares made within a certain period of time, revenue is more important than dividend yield. If you rely on your investments to provide consistent profits, the dividend yield is more important. If you have a long-term investment horizon and plan for a conservation portfolio for a long time, it makes more sense to focus on aggregate income. However, the valuation of the company for a potential equity investment should not be reduced to only these two figures; on the contrary, looking at the balance sheet and the statement of profit and loss, and perform additional research.

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