Here’s How to Buy Dividend Stocks Looking at Yield Charts

  • Stock Market Analysis
  • Editors Pick

Many investors are inclined towards high-quality dividend stocks. However, adding such stocks to the portfolio at the right time is very crucial from both the capital appreciation perspective and the actual payout perspective.

Dividend yield is influenced by two factors - the price of the stock and the dividend per share (DPS). The right time to add dividend stocks is when the yield is high which simply means either the price drops or the DPS increases as these two factors are inversely and directly correlated to the yield, respectively.

While the yield is easily available everywhere, the yield chart is something that investors should look at before making their purchase. A yield chart is simply a plot of dividend yield over a period of time, just like a price chart.

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The major benefit it serves is to compare the present yield to the past yield and gives a valuable perspective on whether is it the right time to add this stock or not.

Image Description: 1-year Dividend yield chart of REC (NS: RECM )

Image Source: Investing Pro+

Let’s take the example of REC Limited. 1 year back, the stock was trading at a dividend yield of over 10%, however, as the stock kept gaining momentum its yield started to drop, which can be clearly seen in the chart above. A falling yield chart indicates either the stock price is rising of the DPS is decreasing. In either case, it's not a good time to buy the counter.

Once the yield chart starts to stabilize after a fall or makes a move to the north, that is where the yield is rising either because of a price drop or an increase in the DPS. And that is where investors should keep a tab on their favorite counter.

In the case of REC, the yield, after falling from 10% to below 3% has not started to recover. This is not due to an increase in the DPS but because the price is down 11% this month so far. The beauty of such charts is that investors do not separately look at the DPS or the stock price. The yield charts incorporate both parameters and notify investors.

You can look at the dividend yield chart of any stock on InvestingPro+.

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  • David Jayanth @David Jayanth
    Hi ! Are all these features only available in Pro+ and not in Pro ??
    Like 0
    • Aayush Khanna @Aayush Khanna
      @David Jayanth Hi David, these advanced yield charts are not available with the Pro version. There are many other advanced features that come with Pro+ which are not available with Pro.
      Like 0
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  • Ramesh Sawna @Ramesh Sawna
    Want to canvacection with u aboutbit
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    • Aayush Khanna @Aayush Khanna
      @Ramesh Sawna Yes, please tell me.
      Like 0
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