Which Dividend Yield Should You Buy?

The previous lesson looked at the payout ratio, while this lesson looks at the dividend yield, ie. the percentage of dividend compared to the share price.

“Reasonable” high yield is the best, in general. However, contrary to many other surveys of value indicators, quintile 2 is the best, not the group with the highest dividend yield.

We find that the second quintile gives maximum return i.e., the second-highest yield group. This is also evident from the study carried out by Hartford Funds that shows how much of the time the supplies generate better returns than the S&P 500.

Dividends are derived from a company’s profits. Therefore, it is quite likely that in most cases, dividends would generally be a sign of good financial health. Even from the perspective of investment strategy, purchasing established companies with a history of good dividends lends greater stability to your portfolio.