Tuesday, April 21, 2009

Beware of Dividend Yields That Look Too Good to be True:

Jennifer Lowe publishes an article on What Investment that points out a few cautions to investors eventhough the market has rebounded from recent lows.

"Even in supposedly defensive areas, some companies will need to address pensions deficits or seek help with contracts. A warning last month from the Pensions Regulator, that pensions must come before dividends, shocked many companies with pension funding deficits. Companies with dividend yields of six per cent or more are being given little credit in their share prices for the payout. Low share prices relative to the cash paid out by companies are a stock market signal to boards to be more prudent with cash."

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