Historical Dividend Yield

[Kerim]

So there has been a ton written about the importance of getting into your DG stocks at the right price. Even the best dividend streams are not worth overpaying for. I don't mean to say that no stock deserves a premium -- it makes perfect sense to me that KO would generally trade at a higher multiple than, say, an oil stock or a tech stock.

And of course it would be dangerous to consider dividend yield in isolation. But after I have done a fair bit if analysis of one of my prospects, I like to have a look at its historical dividend yield, and I get excited when I see that it is at the high end of its own range. This could happen because of a recent dividend raise, or because the price of the stock is at the lower end of its range, or other factors. But if I am confident that the price is not on its way down for specific reasons, then seeing a dividend yield in the high end on the stock's range makes me think it could be a good time to buy.

Is this something that others consider? What do you think?

[Lost Fish]

My approach to dividend stock investing is fairly conservative and I look at it as a favorable alternative to other long-term savings options right now because of low interest rates. That said, I have to feel comfortable with a company's stability and proven track record before investing, because I am not in-and-out but rather buy-and-hold.

I agree that high dividend yield may signal a good time to buy, and still I want to know: what beta does the stock have? Why is the company being valued on the low end right now?

For me 95% of the research is done on the front end before I lay down a single dollar. I want to have the peace of mind that I won't need to be checking on it every single week (or day!) to make sure that it hasn't tanked. I am sure there are others who will snatch up the riskier and high-yield dividend stocks, and I am fine with that.

Because I am in it for the long term and to sleep well at night.

[Kerim]

Welcome to the forum, Lost Fish! Glad you found us. As you can probably tell, we’re still in the very early days here, but I’m feeling very optimistic that we’re going to be able to grow a great community around this topic. Please let us know if you have thoughts about making the site better.

I agree whole-heartedly with your approach. You’ve stated well several principles that I think are shared broadly among dividend growth investors – valuation, long-term time horizon, lower risk. Dividends alone are not enough – the stock must also be sound on other metrics. And of course a high yield can be a sign of serious trouble with a stock, when the share price is tanking but before the dividend is affected. You have to look at all the factors.

[cannew]

That's one of my main criteria, comparing the current yield to the companies long term average yield (min 10 yrs). I also compare it to my Yield on Investment. Great starting point.