123ArticleOnline Logo
Welcome to 123ArticleOnline.com!

ALL >> Education >> View Article

Dividend Yield Funds: Investing Strategies

By Author: Artham Vidya
Total Articles: 24

What kind of an investment strategy do Dividend Yield schemes follow?

Dividend yield schemes offer limited protection in falling market scenarios as such dividend paying stocks usually do not fall as much as the broader market. These schemes focus on the cash generated by the companies in which they invest business and this provides for stable returns even in volatile market conditions.

The dividend yield on a stock is inversely related to its price – that is, when the dividend yield (pay out) is high the lower is the price of the stock and the other way round. When the market goes up and stock prices are high, the dividend yield falls. On the other side, when markets are falling and stock prices are low, dividend yields rise. In either case, fund managers manage to make profits – in the first case from high prices and in the second case from higher yields.

Fund managers of such schemes prefer to invest in stocks with higher dividend yields, which are more attractive and generate stable dividend income during bear markets. There is a built-in self-correcting mechanism for dividend yield stocks and this balances the assets, enabling such schemes to generate stable returns.

Fund manager also pick stocks that apart from paying regular dividends have potential for capital appreciation. Therefore, one can expect to earn a decent recurring income and record capital gains over time.

How much dividend has to be paid out by a company depends on its earnings as well the outlook for the company, industry sector and the economy in general. A part of the profits of any company is ploughed back into the business and if there is any surplus that will be distributed to shareholders.

Usually a high growth will not be able to pay good dividends because it will be using all available resources to grow the business. On the other hand, a company that has a stable business and is growing at an above average rate would probably pay a good dividend.

In a nutshell, dividend yield stocks provide a cushion in the form of a stable dividend income during bear phases, while they generate capital appreciation during bull phases. Therefore, investors with any kind of risk appetite can consider investing in these schemes.

Total Views: 55Word Count: 379See All articles From Author

Education Articles

1. Know The Career Benefits Of Scrum Master Certification
Author: Multisoftsystems

2. Introduction Of Web Designing Course Tutorials
Author: Learn web designing course Bangalore, Infocampus i

3. What Will Study In Australia Cost For International Students From Nepal?
Author: aanandita kumari

4. 300-209 Study Guides
Author: rocky hughes

5. Mbbs In Russia
Author: pooja

6. Mbbs Service In Russia
Author: pooja

7. Take Your 3d Designing And Drafting Skills To A New Level Through Pdms Training
Author: Multisoft Virtual Academy

8. Malaysian Business Assignment Writers – Experts In Their Job
Author: Karen Wilson

9. 70-333 Exams Study Guides
Author: rocky hughes

10. Live Oracle Adf Online Training By Virtualnuggets
Author: vasu buddi

11. Web Design Composition Curriculum For 2017-2018
Author: Learn best web designing course Bangalore.Infocamp

12. Necessary Steps To Take While Hiring A Tax Agent
Author: Austin Loader

13. 4 Tips On How Parents Can Help Children To Improve In Study
Author: Hayden Bowden

14. Why Has The Australian Education A Global Focus Today?
Author: aanandita kumari

15. Develop Excellent Cloud Computing Skills By Availing Microsoft Windows Azure Training
Author: Multisoft

Login To Account
Login Email:
Password:
Forgot Password?
New User?
Sign Up Newsletter
Email Address: