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Investment Analysis Clubs / The BMW Method


Subject:  Re: A learning curve Date:  9/14/2012  7:43 PM
Author:  RaptorD2 Number:  40714 of 42233

If you sell your Wal-Mart shares you can take your profits and now buy shares in a company whose dividend is yielding considerably more than Wal-Mart's is at the current stock price.

Seems to me that this is a very poor way to look at the situation.

The only yield that is important is the yield when you buy the stock. That yield will stay the same no matter what, for as long as you own the stock. If you had a 5% yield to begin with, you have a 5% yield forever.

The fact that yields drop when the price rises should not be a consideration for selling; it simply makes no sense. All it means is that along with your dividend over the years, you have also gained potential value in the underlying stock. To think otherwise is akin to hoping that your stock doesn't go up in price because your yield will drop. Not so!

I'll take the divvies and the appreciation 24/7/365, and I will still have the same yield as when I started. Or, perhaps I missed a point somewhere along the way; wouldn't be the first time. Adding to existing shares is another story and then the current yield becomes a consideration; but for holding, a shrinking yield only means that your stock has appreciated in value (actually, price) and that's a good thing.

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