For you who is planning to make a long term investment in global stock, you must be familiar with the term dividend. For this dividend will be the profits from the investment you make. But what is a dividend? Here is what you need to know!
Definition of Dividend and Global Stock Dividend Yield
Global stock dividend has a similar meaning to stock dividend in general, which is the distribution of a company’s profits to shareholders based on the number of shares they own. Meaning, the more shares you own, the higher your dividends will be.
The dividend yield is the percentage of dividend distributions paid per share in a certain year with a nominal value per share.
Because it is calculated based on current price per share, the dividend yield may fluctuate. This dividend yield can also be used as a basis to measure a company’s financial health.
For details, here are the illustrations:
- If Company A paid out $1 in dividends and its shares cost $40, the percentage of its dividend yield would be (1/40) = 2,5%.
- If Company B paid out $2 in dividends and its shares cost $40, the percentage of its dividend yield would be (2/40) = 5%.
Looking at the calculations, investing in company B is more profitable as it pays out higher dividend yields compared to company A.
Deciding Global Stock To Buy Based On Dividends
Based on the explanation above, you may think that a company with high dividend yields is always profitable. However, that is not the case. You should consider other aspects as well. For each nominal value of money paid as dividends by the company cannot be made into investment to get capital gains. So, you should really know the reason behind the high percentage of its investment returns before investing in that company.
If the high percentage is caused by decreasing dividend payout ratio or in the case where stock prices are at their lows, it can show that the company may be in trouble. Beside that, a company’s line of business and dividend policy of a state can also affect the percentage of dividend yields. Thus, you cannot decide which company to invest just by looking at one side only.
To help you decide which company is the best for you to start investing, you can use NANOVEST. You just need to download the app on Play Store and AppStore and fill out the registration form. With this app, you can learn more about global stock investment and you can consult us before deciding which field or company to choose.