Dividend Yield, Explained: Why I'm Holding High-Yield Stocks My Conviction Ratings Flag as "Strong Buys"
Dividend yield is a tool I use that tells me much more than just the income an investment generates.
Overview
Dividend yield equals the annualized dividend divided by the stock price. It is one of the easier financial metrics to calculate and understand. But the dividend and the dividend yield can tell you much more than just what income you can expect from an investment. In fact, the dividend and dividend yield are core components of my investment approach, helping me identify high-conviction opportunities such as Procter & Gamble (NYSE: PG), Federal Realty (NYSE: FRT), and Enbridge (NYSE: ENB).
Before getting to dividend yield, I usually start with the dividend alone. Or, more precisely, a company's dividend history. It requires a strong and growing business to support a dividend that is regularly increased. So, a dividend history that is filled with annual increases is solid evidence that a company is worth owning.
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Originally published at www.fool.com.