Beware the Dividend Yield Trap

Lofty Yield Can indicate Troubles
If companies offer bonus for getting high investment in their business then it is a sign of intelligence. It will give you benefit if you keep their stock for a year or more.
The bonus is added to the real price of the stock. In this way the investors get profit as their income remain safe and they get profit as well. If you are not in need of money then you can use your bonus in your investment.
The investors have many ways to check the bonus. They look at the rate of bonus. It guides them to invest money on the right place. In this way, they will get to know about the percentage of profit given on a certain amount of investment.
Calculating Bonus Yield
It is easy to calculate the percentage of bonus by using the given way:
Bonus yield=one year bonus on single share/the rate of stock on each share
With the use of stock screens, we can get to know about the rate of bonus offered by different companies.
It is good to know the rate of bonus of different companies. But it is not good to invest money just by knowing this factor. It does not mean that if a company is going to give a high rate of profit then it will save you from loss. Investment in companies is not as easy as it seems to be.
Bonus Yield Ensnare
The offer related to profit can make you a victim of great loss. People who have some idea of stocks know about the relation of profit with stock. It is considered that the rate of profit depends on the rate of stock per share. In case, the rate goes down and the bonus related to it does not change then you can get more profit.
It is easy to purchase a company which has a high rate of profit. On the other hand, the company which is not stable cannot give you profit in the coming years.
What are the other basics of this phenomenon? The bonus which is paid to the investors is not related to their real money. In order to check whether the company is stable enough to give bonus, we have to check their ways of providing cash.
In case, the company has to pay greater debt then it will be difficult that the company will provide enough amount of bonus.
If we check at stock screens then we get to know that rate of profit is not whole sole item which gives you the guarantee of revenue.


Now check the screen and choose the companies which have a high rate of revenue. You have to check the companies who are able to provide the revenue for the coming years. After getting satisfied, you can make an investment in a stable company.
Terminating Point:
The companies which have a high rate of profit as well as proper basic features can give you a satisfactory amount of revenue. It is not good to make investment just by checking one feature of the corporation. If the company has one bright feature but all other fundamentals are in doubt then you have to avoid in making investments.