Desirability
Historically, a higher dividend yield has been considered to be desirable among many investors. A high dividend yield can be considered to be evidence that a stock is under priced or that the company has fallen on hard times and future dividends will not be as high as previous ones. Similarly a low dividend yield can be considered evidence that the stock is overpriced or that future dividends might be higher. Some investors may find a higher dividend yield attractive, for instance as an aid to marketing a fund to retail investors, or maybe because they cannot get their hands on the capital, which may be tied up in a trust arrangement. In contrast some investors may find a higher dividend yield unattractive, perhaps because it increases their tax bill.
Dividend yield fell out of favor somewhat during the 1990s because of an increasing emphasis on price appreciation over dividends as the main form of return on investments.
The importance of the dividend yield in determining investment strength is still a debated topic. The persistent historic low in the Dow Jones dividend yield during the early 21st century is considered by some investors as indicative that the market is still overvalued.
Read more about this topic: Dividend Yield
Famous quotes containing the word desirability:
“I suggested to them also the great desirability of a general knowledge on the Island of the English language. They are under an English speaking government and are a part of the territory of an English speaking nation.... While I appreciated the desirability of maintaining their grasp on the Spanish language, the beauty of that language and the richness of its literature, that as a practical matter for them it was quite necessary to have a good comprehension of English.”
—Calvin Coolidge (1872–1933)
“He was too delicate to admit, even to himself, the desirability of marrying two thousand a year.”
—E.M. (Edward Morgan)