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Strategies & Market Trends : Dividend investing for retirement
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To: Debt Free who wrote (3178)12/31/2009 7:18:19 PM
From: Kip S2 Recommendations  Read Replies (1) of 34328
 
For instance if the yield is currently 5% and your effective yield is 10% (because of your purchase price) the yield you receive is only 5% of your current value. Therefore if you look at it from the perspective that it is yielding 10% then you are potentially overstating what you are receiving.

Agree with your post, DebtFree. There is a tendency to think in terms of return on our investments based on their original, historical cost. This can lead to poor decisions, though, I believe.

For example, say I bought something a very long time ago, such that it is now yielding, say, 8% on my original investment. However, its current yield is 2%. If I am pursuing a dividend strategy, I would likely be better off selling it, taking the capital gain, and buying something with a higher yield.
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