The best dividend stock is the one that has the highest dividend yield. Rather than searching for stocks that will pay you the highest dividend amount, the dividend yield is what you should pay attention to.
While the COVID-19 crisis had its fair share of effects in the market, leading to a stock market correction earlier this year, most companies are now gradually getting back up as the economy opens. This makes it a great time to invest in stocks while the prices are more affordable and can get you more in return.
This is where the dividends and other distributions shine. The best stock is the one that pays the highest dividend yield for many investors. By purchasing stocks that have a high dividend yield, you can get your initial investment back over time.
What is the dividend yield?
Think of the dividend yield is the percentage you will get back in return for your investment. The dividend yield is as basic as it sounds, it’s the dividend per share divided by the stock price.
At the time of writing, the National Health Investors Inc. (NHI) has the highest dividend yield at 6.65 percent. A $100 investment in the company would equal to $6.65 in dividends every year.
However, most dividends aren’t paid annually. Instead, the companies hand out dividends to its shareholders every quarter after reporting the earnings. This is why the dividend yield is what needs to be taken into account rather than the actual dividend amount since it refers to a quarterly amount.
In one of our previous articles, we’ve presented you with the highest dividend stocks which some of you may refer to as best stocks if the dividend stocks is what get your attention.
The bottom line is the best dividend stocks are the ones that have the highest dividend yield. Just like any other investment though, make sure to read the market as the dividend yield is subject to change. As a general rule, if the stock goes up, the dividend yield drops, or vice versa. This is why reading the market is quite important.