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Dangers of Dividend Funds

On 05/13/2012, in Equities, Mutual Funds, by Jordan Wilson

Dividend funds are currently very popular with investors.

In many parts of the world, interest rate yields are quite low on a historical basis. To enhance returns, fixed income investors have turned to riskier investments that may offer higher yields. Such as dividends on preferred shares or dividend paying common shares.

As well, general equity investors are turning to perceived “safer” equity investments. Common shares in large, dividend paying companies. Shares that provide capital gains potential over time, but are back-stopped by a (hopefully) steady stream of dividend income.

Sounds like a good strategy to me. But there are always risks when investing.

Here are a few things to consider when assessing dividend funds (or dividend paying shares). 

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Dividend Yield

On 09/03/2010, in Equities, Investment Strategies, by Jordan Wilson

Another ratio used by value investors, as well as seekers of cash flow, is the dividend yield.

Whereas value investors seek companies with relatively low price-to-earnings (P/E) and price-to-book (P/B) ratios, they desire companies with high dividend yields.

Today we will look at the dividend yield.

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