Friday, July 3, 2009

Dividend Yield or Dividend Growth?

ETF Guy from Exchange Traded Funds (ETF Topics.com) writes a thoughtful article on considering two characteristics of a stock, dividend yield and dividend growth, and which metric to choose for a better investment.

"I'd rather invest for dividend yield over dividend growth but my favorite strategy lies somewhere in the middle. I assume most stocks that operate under a high dividend yield, do so for one of several reasons: The share price has recently dropped (due to bad news? poor outlook?), it might be a risky business, or it could be an old ‘out of favor' cash cow. Either way, I would never invest in a company that isn't solid and at least growing modestly. So that should filter out a bunch of high yield stocks, but not all."

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