4 Factors to Consider in Determining Dividend Yields
Dividends4Life submits: If income investing were as simple as picking the stock with the highest yield, everyone would be an expert. Most assume (rightfully so) that yield is heavily influenced by risk, but much more goes into determining yield. Below are several important factors that influence a stock’s yield, along with some illustrative examples:Industry Have you ever noticed that stocks within an industry often have similar yields? This makes sense when you consider they often have like operations with processes, cost structures and margins. This is evident when you look at retailers who buy similar products, resell them in a physical location and have fairly low margins due to the intense competition. Note the yield similarity of Target Corp. (TGT) with a 1.3% yield and Costco (COST) with a 1.5% yield. Even WalMart (WMT) with their economies of scale and focus on efficiency has a yield only slightly higher at 2.4%. The same analysis could be done with The Coca-Cola Company (KO) with a 3.4% yield and Pepsico, Inc. (PEP) with a 3.1% yield.Complete Story »
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