Are high yields too good to be true?
Income investors naturally place great store on dividend yields. On a yield of 5%, they know that for every thousand pounds they invest it will return £50 in dividends. And on a yield of say 2%, every thousand pounds they invest will return only £20. High yields are attractive to investors, but dividend yields aren’t always the whole story. And when looking at dividend yield in isolation this can lead the unwary into traps. Dividend growth, dividend history, and forward-looking estimates can usefully help add to the picture.
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