A basic guide when investing for yield

SINGAPORE (May 7): Buying a high-yielding stock seems like a pretty good idea when we have heightened market volatility. For starters, companies that pay higher-than-market-average dividends tend to have mature businesses that are more defensive and hence, their share price movements are usually less volatile. Worst comes to worst, one will still get a steady income stream while holding the stock for the longer term.

The recent market correction, ­particularly for mid-small cap stocks on Bursa Malaysia, has certainly made yields more attractive.

For the uninitiated, Yield = Dividend per share ÷ Share price. Hence, when stock ­prices fall, yields will rise, all else being equal.

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