Learn How to Avoid Dividend Yield Traps With Example

Avoid Dividend Yield Traps : A Dividend Yield Traps is the stock dividend pay faster than the company earnings. The process is done by making the shares as it appears on a price-to-earning and yield basis. The dividend trap is the offers yield higher than 5% that you can picture yourself. Dividend traps leave an impression of safety as the market goes crazy and creates the confusion. That dividend is a high yield and produces a lot of income from capital. The second thing is the dividend trap to destroy the capital. So the management at one point will announce a dividend cut and call of my favorite expressions.

The dividend investors have high yield desirable that makes a good investment. To debt a company it has a high need to cut its dividend during a tough economy. The useful metric for dividend investors is to know the payout ratio which is calculated as a company annual dividend payout rate divided by the earning. The high payout ratio is over 100% that indicates a dividend.

Example

DDR Corp is a real estate investment that specializes in shopping center properties. It is based on the current stock price then DDR yield is more than 10.2% as REITs tend to have a high average dividend. They have a high level of debt so at the end of 2017 the company has $3.9 billion in debt which is high for a REIT with a $2.7 billion market cap. The debt makes up about 60% of the company's total capitalization. The comparison of solid REITs has debt-to capitalize on the ratios of 40% or less.

Avoid the dividend yield

The dividends offer benefit as income generation and greater return on investment when the stock price appreciates holding period. The long ideas provide investors with a dividend yield and important companies that has cash flow used to sustain the dividend.

Quality Stocks with Quality Dividends

The correlation between dividends and cash flows is not always true. Identify troubled companies and avoid them with high dividends at the moment.

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