One of the most common questions asked in the realm of investing and stock market strategies is that of dividend yield. It is an elusive term that is often coined by influencers, stock market experts, banking executives, and your stock trading platform no doubt.
Dividend yield is becoming a hot button topic and area of interest since the rising tide of passive income methods came into the forefront, mostly as a result of the 2020 lockdown and subsequent restrictions that put undue pressure on people to quickly find alternative and consistent forms of income.
The notion of passive income is also hotly debated and of course, because it is an online world now, there are a number of strategies touted by ‘experts’ that only work in the confines of imagination – thankfully, with the right investment strategy, a good grasp of the concept, and some decent resources, you don’t need to have a degree in commerce to gain a profit from dividend yield stock options.
This article will go over the concept of dividend yield, the best approach to begin your journey of passive income building, and some trope to avoid when searching online for a stream of revenue.
What Is Dividend Yield?
Okay, let’s get the elephant out of the room shall we. Some companies that appear on the stock exchanges around the world offer a certain lucrative addition for purchasing into their company – at various points of the year (it’s different for everyone, usually quarterly or annually) a company will section off their profits and give a percentage back to their investors.
The amount received is called dividend yield and it is that sweet spot payment that can make passive income a steady and reliable reality. However, there are some caveats, and things to remember before jumping headfirst into the shark infested waters of investors and money grubbers.
Choosing The Right Pathway
The right pathway will depend entirely on your investment strategy, if you’re looking to make a little more bang for your buck in a shorter time, then the risk will invariably be higher in order to secure this. Sure, the money may be better, but it comes with a risky side as well. For instance, dividend yield payments come when a company is in the positive in terms of profit. If you’re investing heavily for dividend yield purposes with a smaller company that offers a larger rate, you may get a decent payout, but you may also end up with a loss if the company doesn’t follow through.
Going with larger conglomerate companies is ostensibly harder in terms of large profit generation as the share price is usually much higher and as a result, the dividend yield will likely be lower for the average investor. However, if your goal is longevity and reliable passive income then a larger reliable company with a proven track record of profits will undoubtedly be the better option for most people.
Avoid The Click-Sperts
The click-sperts are the experts that only seem to appear when a fad keyword pops into being; ‘passive income’ and ‘dividend yield stocks’, ‘day trading’, ‘NFTs’ are all too common. While it is tempting to see a bunch of $50.00 notes falling down in front of the screen along with a stock chart and a paywall, there are better means of determining the right investments for you.
Accept that it may take some time, but like anything worthwhile, time is a good thing. It allows you to build, understand, and most importantly LEARN about the market, and help you find the best stocks with the most suited dividend yield.