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Understanding dividend yield percentage
There are many types of investing strategies that are available to investors. Some are more growth oriented and others are more income based. For dividend investors one of their most important metrics is the dividend yield percentage. This tells the investor how much of the the yield is relative to the share price. For example, if a stock had a share price of $1 and it paid a $0.01 dividend it would have a yield of 1%. Many dividend investors use the dividend yield as a signal of how good or bad an investment is.
There are a few important things to note about the dividend yield. First is that it will change depending on the share price because the dividend is a reflection of the value of a given stock. In market booms, you would expect to see higher dividends which would be reflected in the lower percentage. In market downturns you are likely to see higher percentages as yields are reflected of lower share prices. It is very important not to fall into yield traps, which show a high dividend yield percentage and payout. Oftentimes these tend to be less sustainable investments which can lead to dividends being cut or suspended.
Dividend yields are important metrics for every investor. You want to make investments based on sound and sustainable strategies to get the most out of every investment you make.
