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Dividend yield in focus: Tips from financial experts for choosing the right stocks and the compound interest effect - BNP Paribas Easy ESG Equity Dividend Europe UCITS ETF Capitalization in check.
According to a report from stock3.com, finding the perfect stock often comes down to dividends. A high dividend may seem attractive, but it is the dividend yield that ultimately matters. This key figure relates the annual dividend payments to the current market price of the share. Assuming a company pays an annual dividend of EUR 2 per share and the current share price is EUR 50, the dividend yield is 4%. If the share price rises, the dividend yield falls, even if the dividend remains stable. However, a particularly high dividend yield can also be a warning signal, especially if the share price has fallen sharply. For dividend stocks...
Dividend yield in focus: Tips from financial experts for choosing the right stocks and the compound interest effect - BNP Paribas Easy ESG Equity Dividend Europe UCITS ETF Capitalization in check.
According to a report by stock3.com, the search for the perfect stock often comes down to the question of dividends. A high dividend may seem attractive, but it is the dividend yield that ultimately matters. This key figure relates the annual dividend payments to the current market price of the share.
Assuming a company pays an annual dividend of EUR 2 per share and the current share price is EUR 50, the dividend yield is 4%. If the share price rises, the dividend yield falls, even if the dividend remains stable. However, a particularly high dividend yield can also be a warning signal, especially if the share price has fallen sharply.
When it comes to dividend stocks, it is important to check the sustainability of the dividend policy. The company's dividend policy in the past and the payout ratio, i.e. how much of the annual net profit is paid out as dividends, are crucial factors.
When it comes to compound interest, passive income through dividends is often emphasized, but in practice the challenges of reinvesting dividends and dealing with dividend payments become clear.
As an economist, I therefore favor dividend ETFs instead of individual stocks. The accumulation type of distribution allows dividends to be reinvested automatically. An example of such a dividend ETF is the BNP Paribas Easy ESG Equity Dividend Europe, which tracks European companies in a sustainable and diversified manner. This strategy combines dividend income and diversification.
Overall, it is clear that strictly considering dividends or dividend yield is not enough to make an informed investment decision, especially given the possible risks and challenges in managing dividends from individual stocks. Therefore, choosing a dividend ETF is a promising alternative for investors.
Read the source article at stock3.com