New investors in the stock market will encounter many technical terms that might scare them away from trying out their luck in the game. Many beginners will just look at the dividend yield as an indicator of how much they might earn with a particular stock batch. Unfortunately, there are more terms that one should know in order to understand this concept thoroughly.
The dividend yield shows what each stock will earn for each financial quarter, or in most cases, each fiscal year. A stock with a high dividend yield is a good option for those who want to stick with one name for more than one year, but for those looking to buy and sell while playing the market should look at other indicators as well.
For one, good stocks will have high dividend growths which are to be considered a healthy indicators one on the market. Those stocks that have increased the value of their annual cash dividends consistently over the years are a good way to start. It’s important to look at the manner in which the growth happened as an inconsistent rate will indicate that it’s susceptible to market fluctuations or management changes.
Beginners should look for stocks that have consistent growth rates even if they have very low yields. In fact, this is the best way to go as you will be able to cash in on their future yields for many more years into the future.