What is considered a "good stock"?
Factors such as good capital gains and regular, strong dividends come to mind instantly.
Dividend yield is a good indicator of a company’s financial strength.
What is dividend yield?
Very simply, the dividend yield can be represented as:
Annual Cash Dividend per Share Price per Share
For example, assume both Company A and Company B pay out RM1 for each of its shares. However, the share price for Company A is RM10/share and RM20/share for Company B.
Applying the formula above, the dividend yield for Company A’s shares is 10% while it’s 5% for Company B.
In this simple example, assuming all other factors remain equal, it’s clear that Company A gives a higher dividend yield and therefore, is a better pick compared to Company B.
Here are some examples of high dividend yield blue chip stocks in FY2012:
JT International 12.8%
Guinness Anchor 9.4%
Malayan Banking 7.1%