Dividend Yield

I like dividend yield as a valuation measure. I would rather own a company that pays out 90% of earnings than one distributing 40% ceteris paribus. Cheap, high growth, high return-on-equity (ROE) companies make the best investments as they return a large and growing stream of cash to shareholders. A high dividend yield often indicates cheapness and high ROE so is a good starting point. Debt needs to be considered as some companies temporarily sustain high dividends by leveraging their balance sheets. ALU, JIN, PME, DDR and KME all had dividend yields greater than 5% at one time.

Comments

  1. PTB is another solid stock with a great dividend yield.

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  2. Isn't the ideal company one that can reinvest ALL of its earnings at sustained high rates of return?

    Not that they're very common at all, but I'd prefer that over (for example) DDRs model.

    I just find it hard to find any company that can reinvest that much money and continue to make outsized returns.

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  3. The ideal company is one that can grow infinitely quickly using no capital. I'm not going to find one of those either.

    I just want high ROE, high growth, low price.

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