A share costs €20 and pays €2 a year: 10%. Then the price falls to €10. The same €2 now reads 20%. Nothing got better. The price fell.
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A company that earns €1 a share and pays €2 is paying out 200% of its profit. The extra euro comes from savings or loans. That can last a while, not for ever.
General Motors paid $2 a share a year from 1997. As its shares fell, that passed 8%, the highest yield in the Dow. In 2006 GM cut it in half, in 2008 it stopped, and in 2009 GM went bankrupt.
The highest yield on a list looks like the best deal. Often it is the market saying it doubts the dividend. One exception: property funds (REITs) must pay out most profit, so theirs run high.
Walgreens paid a dividend every quarter for 91 years. In January 2024 it cut it by 48%. On any stock page, find the payout ratio: under 100%?
A high yield is often a fallen price. Check the payout: a dividend bigger than profit cannot last.
Do it today
Check one payout ratio: under 100%?
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