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High Yield SharesCreating an income portfolio |
Why high yielders?
There are different reasons for choosing to invest in high yielding shares rather than any other type of share.
Some groups such as those that are retired may be using the income generated by the shares to provide the income they need to live off - in some cases this income may completely replace a pension annuity or other earned income.
Some beleive that high yielding shares offer the best investment in terms of total return - effectively assuming that the high yield is a result of low share price and hence value.
Others may just enjoy the psychologicaly benefits of seeing their investments generate a good income rather than relying solely on increase in value of the shares held.
What are high yield shares?
Some shares return part of their profits back to shareholders in the form of dividends - cash payments for each share held.
Yield is defined as the annual dividend income divided by the value of the shares (share price). It is usually expressed as a percentage. It can be thought of as being comparable to the interest rate for a savings account.
High yield shares are simply those shares that have an above average yield.