It goes without saying that dividend investors want a reasonable yield, but what is reasonable?
Some investors are happy with yields of 2% or less because they believe high growth tomorrow will more than compensate for a low yield today. But for investors who want a decent income today, 2% is unlikely to be enough for all but the most wealthy.
At the other end of the scale, some investors will only invest in high yield opportunities, aiming for something close to and preferably above a double digit yield. At first glance this seems like a no-brainer, but don’t forget that dividends are not guaranteed and promises of double digit yields are often followed by the reality of dividend cuts and suspensions.
For most dividend investors then, looking for shares where the dividend yield is in the Goldilocks zone (not too high and not too low) is sensible. Of course, what is too high or too low is subjective, but I think something in the range of 4% to 8% is a good starting point.
So in this month’s Master Investor magazine I decided to focus on a couple of FTSE All-Share companies, both of which have more than ten years of unbroken dividend payments and a starting dividend yield north of 4%.
Coronavirus and the 2020 stock market crash
Market prices are changing with incredible speed at the moment, so any mention of share price in the article above is now likely to be very wrong.
Also, the FTSE 100 is now at 5,400, with a dividend yield of more than 6%, so what constitutes a “high yield” stocks is now something with a yield of more than 6% rather than 4%.
Having said that, as of this morning my preferred stock from the article has a dividend yield of 8%, so it’s still clearly a high yielder.
And more generally, here are my thoughts on the Coronavirus Crash.