*sing* Please stick to the evaluations that you used to,
I know you gonna have it your way or nothing at all... *sing* (I can't sing)
Falling prey to dividend yield is a common way smart
...but uninformed people succumb to a value trap. And a value trap is
"stock that appears to be cheap because the stock has been trading at low
multiples of earnings, cash flow or book value for an extended time period.
(http://www.investopedia.com/terms/v/valuetrap.asp)" Dividend yield on
its own does not indicate the health of a company. Granted, consistent
dividends that have increased over a long period of time are a good sign of
company health, but it is one of many factors to help identify an undervalued
stock.
Many investors want dividends because they provide which
many investors consider a stable source of income and at times higher yields
than CD's and T-Bills. However, without the potential of capital gains you may
end up losing money from your investment. When a stock price lowers dividend
yield will be higher (all fundamentals remaining the same) so a stock looks
more attractive from that aspect, but the smart investor does not simply rely on
dividends because you need to understand the reason (is it simply institutional
sell-off ?) for the price decline. And with that said...a stock's fundamentals
is only as good as industry averages, industry comparison, and CEO
competencies.
