High Yielding Dividend Stocks - What's Not to Love

Written by: Michael Carbone, CFP®

High-yielding stocks can be an attractive source of income for retirees; however, it’s important to discern, why the high yield? After all, a dividend-yield is just a ratio – dividends per share/ price of the stock. So, couldn’t a stock’s price (the denominator) be low, as opposed to the dividend (numerator) being high? Yes, and this is the case for many, but not all, high-yielding stock investments.

In fact, high yielding stocks are often considered riskier than not. In our view, a high dividend yield is usually a red flag - or at the very least, warrants further investigation. As an exercise, I suggest doing a screen for high-yielding dividend stocks, and then view the historical price performance of those companies, the results may surprise you.

When viewing investment opportunities, I suggest taking a total-return perspective (expected dividends received + expected capital appreciation). If a stock’s dividend yield is high, and you believe it still has solid growth prospects, then it may be a great buy.

If you have any questions or would like discuss my content in greater depth, please feel free to reach out to me at Michael.carbone@raymondjames.com or set-up a 15-minute call.

Michael Carbone, CFP®


Eppolito Financial Strategies, LLC is not a registered broker/dealer and is independent of Raymond James Financial Services.

Any opinions are those of Michael Carbone - not necessarily those of Raymond James. The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that is accurate or complete. Expressions of opinion are as of this date and are subject to change without notice. Investing involves risk and you may incur a profit or loss regardless of strategy selected.

Stock dividends are not guaranteed and are subject to change or elimination at any point without notice.

Past performance is not indicative of future results and there is no assurance that any investment strategy will be successful.