Sunday, October 21, 2012
Yield = Most recent full year dividend
Current share price
As share prices increase, yields decline. As yields increase, share price decrease. Yield is an important measurement of risk. Higher yields often mean higher risks. Stock market crashes or large negative price corrections tend to take place when yields on the DJI reach historical low levels (around 2%.). When yields start to move into the 7% -9% range, it tends to indicate that share prices will start moving up, pushing down the yield. History has shown that investors and speculators tend to flock to higher dividend paying stocks. The increased demand pushes up the price, gradually lowering the yield to more sustainable levels..
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