Chapter II. The importance of a high dividend yield
Posted by S.Zschoche on October 4th, 2009“Many people believe that the stock exchange is some kind of a casino and the only way to make money is to buy a stock cheap and to sell it to a higher price. Worse still is that many of these people also believe that you can get rich at the stock exchange very quick, they buy a stock because they believe that it´s gonna triple within the next weeks. However unfortunately that doesn´t work in most instances and in the end the people often sell their stocks with a loss.
That´s really stupid because in being interested in participating in the earnings of a company these people prefer to play a game with many other idiots who all evaluate the worth of the company every single day. Warren Buffett once said that when he buys a stock he actually never wants to sell it again. But what does he mean with this statement ? How can you make money at the stock markets when you don´t sell your stocks again ? The answer is you buy stocks with a high dividend yield.
In September 2008 for example Warren Buffett bought Goldman Sachs Goldman Sachs stocks at 115 USD. Actually now he could sell these stocks again and make a profit of 55 %. But he won´t do that, because Goldman Sachs pays him a dividend of 10 % on his stocks year for year for year. So Warren participates in the earnings of Goldman Sachs instead of taking care what others would pay for his shares.
Another fact is that a constantly high dividend yield is always a good sign for a sound company, because if a company is able to pay it´s investors a high dividend it has made high profits. Also Warren Buffett once said: “If a business does well, the stock eventually follows.” So if a dividend is getting higher and higher every year it´s a sign that the profits of the company are also getting higher and higher every year, which leads to a higher stockprice.
Last but not least there are many studies which underlie that stocks with a high dividned yield perform better than the total market.


















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