Is it wise to invest in a stock with a large Div yield?
You should not buy soley for the dividend. The price of BHP is going down for a reason. If you hold until the full years dividend is paid you will make 11% (which is $110 if you bought $1000 worth of shares), but if the share price keeps dropping, you might lose 50% on the stock. So you make $110 on dividends but lose $500 on stock price drop. A perfect way to lose money. There have been many interesting and correct answers but to give a direct answer to your first question, dividend yield is simply dividend over current share price. So, if the share price drops, your dividend yield increases proportionately. Dividend yield is not something one should use as the only source of information of whether a stock is a good/bad buy. It does not show many important factors: the riskiness of the company business, its financial position, profitability, ability to generate cash. Furthermore, dividend yield is just a snapshot of an income gain at a given point in time. It does not mean that this very dividend policy is going to continue in the future (especially not so if the company finances this dividend payments using not its own cash reserves but outside capital by issuing debt securities, which is unsustainable). "IMO, what it seems like you've done is nothing more than having screened out a company worth further investigation. The next step would be a thorough analysis of the company's past financials and current statements to arrive at your own opinion / forecast of the immediate and far future of the company's prospects.  Typically, this is done by looking at the company's regulatory filings, and maybe some additional searching on comparison businesses.  There are many sources of instruction for how one might ""value"" or ""analyze"" a company, or that provide help on ""reading a balance sheet"".  (This is not an easy skill to learn, but it is one that will prove invaluable over a lifetime of investing.) It is possible that you'll uncover a deteriorating business where the latest selling, and subsequent drop in price that caused the high yield, is well-deserved.  In which case, you know to stay away and move on to the next idea. On the other hand, you might end up confident that the company is not suffering from a drop in sales, rise in expenses, growing debt payments, loss of ""moat"", etc.  In which case, you've found a great investment candidate.  I say candidate because you still may decide this company isn't for you, even if the financials are right, because you might find better opportunities for an equal, or acceptable, return at lower risk while you're researching. As to the yield being high when there are no problems with the fundamentals of the business, this may simply be because of panic selling during this past few week's downturn, or some other sort of temporary and superficial scare.  However, be warned that the masses can remain irrational, and thus the price stay suppressed or even drop further, for longer than you're willing to wait for your ROI.  The good news is that in that case, you're being well compensated to wait at a 11+% yield!" BHP Billiton has room to answer doubters as commodities rout batters debt notes in part: There has been speculation that the company could cut its shareholder   dividend, while Liberum Capital analyst Richard Knights has suggested   BHP might look to raise as much as $US10 billion ($14.3 billion) in   new equity capital. If the dividend is cut, you won't see 11% and the share price may well decline further. There is a possibility of big losses here given the change in the prices of the products the company sells. To add from another source The only reason BHP trades on a yield of more than 8% is because the   market is pricing in a cut to the dividend. According to consensus   earnings estimates for 2016 and 2017, earnings per share will be $0.86   and $1.27 respectively. Dividends per share forecasts are $1.83 and   $1.81 respectively.
Nobody can give you a safe 6% return with that portfolio under current conditions. It looks like the current 10 year treasury is yielding about 2.2%. With 60% in bonds, the stocks would have to yield about 12%, which just isn't happening safely now. Your cons say it all. I would not be buying stocks based soley on a high dividend yield. In fact companies with very high dividend yields tend to do poorer than companies investing at least part of their earnings back into the company. Make sure at least that the company's earnings is more than the dividend yield being offered. It's tough to borrow fixed and invest risk free. That said, there are still some interesting investment opportunities. A 4% loan will cost you 3% or less after tax, and the DVY (Dow high yielders) is at 3.36% but at a 15% favored rate, you net 2.76% if my math is right. So for .5%, you get the fruits of the potential rise in dividends as well as any cap gains. Is this failsafe? No. But I believe that long term, say 10 years or more, the risk is minimal. "No. That return on equity number is a target that the regulators consider when approving price hikes. If PG&E tried to get a 20% RoE, the regulator would deny the request. Utilities are basically compelled to accept price regulation in return for a  monopoly on utility business in a geographic area. There are obviously no guarantees that a utility will make money, but these good utilities are good stable investments that generally speaking will not make you rich, but appreciate nicely over time. Due to deregulation, however, they are a more complex investment than they once were. Basically, the utility builds and maintains a bunch of physical infrastructure, buys fuel and turns it into electricity. So they have fixed costs, regulated pricing, market-driven costs for fuel, and market-driven demand for electricity.  Also consider that the marginal cost of adding capacity to the electric grid is incredibly high, so uneven demand growth or economic disruption in the utility service area can hurt the firms return on equity (and thus the stock price). Compare the stock performance of HE (the Hawaiian electric utlity) to ED (Consolidated Edison, the NYC utility) to SO (Southern Companies, the utility for much of the South). You can see that the severe impact of the recession on HE really damaged the stock -- location matters. Buying strategy is key as well -- during bad market conditions, money flows into these stocks (which are considered to be low-risk ""defensive"" investments) and inflates the price. You don't want to buy utilities at a peak... you need to dollar-cost average a position over a period of years and hold it. Focus on the high quality utilities or quality local utilities if you understand your local market. Look at Southern Co, Progress Energy, Duke Energy or American Electric Power as high-quality benchmarks to compare with other utilities." "I primarily intend to add on to WBT's answer, which is good. It has been shown that ""momentum"" is a very real, tangible factor in stock returns. Stocks that have done well tend to keep doing well; stocks that are doing poorly tend to keep doing poorly. For a long-term value investor, of course fundamental valuation should be your first thing to look at - but as long as you're comfortable with the company's price as compared to its value, you should absolutely hang onto it if it's been going up. The old saying on Wall Street is ""Cut your losses, and let your winners ride."" As WBT said, there may be some tangible emotional benefit to marking your win while you're ahead and not risking that it tanks, but I'd say the odds are in your favor. If an undervalued company starts rising in stock price, maybe that means the market is starting to recognize it for the deal it is. Hang onto it and enjoy the fruits of your research." In general, investors with a long period of time until they would need to withdraw the cash are best off holding mostly equities.  While the dividends that equities would return are less than the interest you would get in peer-to-peer lending, over long periods of time not only do you get the dividends from equity investment but the value of the stock will grow faster than  interest on loans. The higher returns from stocks, however, comes with more risk of big downturns.  Many people pull their investments out of stocks right after crashes which really hurts their long term returns.  So, in order to get the benefit of investing in stocks you need to be strong enough to continue to hold the stocks through the crash and into the recovery. As for which stocks to invest in, generally it is best to invest in low-fee index funds/etfs where you own a broad collection of stocks so that if (when) any one stock goes bust that your portfolio does not take much damage.  Try to own both international and domestic stocks to get good diversification.  The consensus recommends adding just a little bit of REITs and bonds to your investments, but for someone at 25 it might not be worth it yet. Warren Buffett had some good thoughts on index investing. "I'll give the TLDR answer. 1) You can't forecast the price direction. If you get it right you got lucky. If you think you get it right consistently you are either a statistical anomaly or a victim of confirmation bias. Countless academic studies show that you can not do this. 2) You reduce volatility and, importantly, left-tail risk by going to an index tracking ETF or mutual fund. That is, Probability(Gigantic Loss) is MUCH lower in an index tracker. What's the trade off? The good thing is there is NO tradeoff. Your expected return does not go down in the same way the risk goes down! 3) Since point (1) is true, you are wasting time analysing companies. This has the opportunity cost of not earning $ from doing paid work, which can be thought of as a negative return. ""With all the successful investors (including myself on a not-infrequent basis) going for individual companies directly"" Actually, academic studies show that individual investors are the worst performers of all investors in the stock market." I wouldn't recommend leveraged dividend fishing. Dividend stocks with such high dividends are highly volatile, you will run out of collateral to cover your trades very quickly "It's a trade-off. The answer depends on your risk tolerance. Seeking higher rewards demands higher risk. If you want advice, I would recommend hiring an expert to design a plan which meets your needs. As a sample point, NOT necessarily right for anyone else...I'm considered an aggressive investor, and my own spread is still more conservative than many folks. I'm entirely in low-cost index funds, distributed as ... with the money tied up in a ""quiesced"" defined-contribution pension fund being treated as a low-yield bond. Some of these have beaten the indexes they're tracking, some haven't. My average yield since I started investing has been a bit over 10%/year (not including the company match on part of the 401k), which I consider Good Enough -- certainly good enough for something that requires near-zero attention from me. Past results are not a guarantee of future performance. This may be completely wrong for someone at a different point in their career and/or life and/or finances. I'm posting it only as an example, NOT a recommendation.  Regarding when to rebalance: Set some threshhold at which things have drifted too far from your preferred distribution (value of a fund being 5% off its target percentage in the mix is one rule I've sometimes used), and/or pick some reasonable (usually fairly low) frequency at which you'll actively rebalance (once a year, 4x/year, whenever you change your car's oil, something like that), and/or rebalance by selecting which funds you deposit additional money into whenever you're adding to the investments. Note that that last option avoids having to take capital gains, which is generally a good thing; you want as much of your profit to be long-term as possible, and to avoid triggering the ""wash sales"" rule. Generally, you do not have to rebalance very frequently unless you are doing something that I'd consider unreasonably risky, or unless you're managing such huge sums that a tiny fraction of a percent still adds up to real money." "RED FLAG. You should not be invested in 1 share. You should buy a diversified ETF which can have fees of 0.06% per year. This has SIGNIFICANTLY less volatility for the same statistical expectation. Left tail risk is MUCH lower (probability of gigantic losses) since losses will tend to cancel out gains in diversified portfolios. Moreover, your view that ""you believe these will continue"" is fallacious. Stocks of developed countries are efficient to the extent that retail investors cannot predict price evolution in the future. Countless academic studies show that individual investors forecast in the incorrect direction on average. I would be quite right to objectively classify you as a incorrect if you continued to hold the philosophy that owning 1 stock instead of the entire market is a superior stategy. ALL the evidence favours holding the market.  In addition, do not invest in active managers. Academic evidence demonstrates that they perform worse than holding a passive market-tracking portfolio after fees, and on average (and plz don't try to select managers that you think can outperform -- you can't do this, even the best in the field can't do this).  Direct answer: It depends on your investment horizon. If you do not need the money until you are 60 then you should invest in very aggressive assets with high expected return and high volatility. These assets SHOULD mainly be stocks (through ETFs or mutual funds) but could also include US-REIT or global-REIT ETFs, private equity and a handful of other asset classes (no gold, please.) ... or perhaps wealth management products which pool many retail investors' funds together and create a diversified portfolio (but I'm unconvinced that their fees are worth the added diversification). If you need the money in 2-3 years time then you should invest in safe assets -- fixed income and term deposits.  Why is investment horizon so important? If you are holding to 60 years old then it doesn't matter if we have a massive financial crisis in 5 years time, since the stock market will rebound (unless it's a nuclear bomb in New York or something) and by the time you are 60 you will be laughing all the way to the bank. Gains on risky assets overtake losses in the long run such that over a 20-30 year horizon they WILL do much better than a deposit account. As you approach 45-50, you should slowly reduce your allocation to risky assets and put it in safe haven assets such as fixed income and cash. This is because your investment horizon is now SHORTER so you need a less risky portfolio so you don't have to keep working until 65/70 if the market tanks just before retirement. VERY IMPORTANT. If you may need the savings to avoid defaulting on your home loan if you lose your job or something, then the above does not apply. Decisions in these context are more vague and ambiguous." There can be the question of what objective do you have for buying the stock. If you want an income stream, then high yield stocks may be a way to get dividends without having additional transactions to sell shares while others may want capital appreciation and are willing to go without dividends to get this. You do realize that both Pfizer and GlaxoSmithKline are companies that the total stock value is over $100 billion yes? Thus, neither is what I'd see as a growth stock as these are giant companies that would require rather large sales to drive earnings growth though it may be interesting to see what kind of growth is expected for these companies. In looking at current dividends, one is paying 3% and the other 5% so I'm not sure either would be what I'd see as high yield. REITs would be more likely to have high dividends given their structure if you want something to research a bit more. "As you note, your question is inherently opinion-based.  That said, if I were in your situation I would sell the stock all at once and buy whatever it is you want to buy (hopefully some index ETF or mutual fund). According to what I see, the current value of the HD stock is about $8500 and the JNJ stock is worth less than $500.  With a total investment of less than $10,000, any gain you are likely to miss by liquidating now is not going to be huge in absolute terms. This is doubly true since you were given the stock, so you have no specific reason to believe it will do well at all.  If you had picked it yourself based on careful analysis, it could be worth keeping if you ""believed in yourself"" (or even if you just wanted to test your acumen), but as it is the stock is essentially random.  Even if you want to pursue an aggressive allocation, it doesn't make sense to allocate everything to one stock for no reason.  If you were going to put everything in one stock, you'd want it to be a stock you had analyzed and picked.  (I still think it would be a bad idea, but at least it would be a more defensible idea.) So I would say the risk of your lopsided allocation (just two companies, with more than 90% of the value in just one) outweighs any risk of missing out on a gain.  If news breaks tomorrow that the CEO of Home Depot has been embezzling (or if Trump decides to go on the Twitter warpath for some reason), your investment could disappear. Another common way to think about it is: if you had $9000 today to buy stocks with, would you buy $8500 worth of HD and $500 worth of JNJ?  If not, it probably doesn't make sense to hold them just because you happen to have them. The only potential exception to my advice above would be tax considerations.  You didn't mention what your basis in the stock is.  Looking at historical prices, it looks like if all the stock was 20 years old you'd have a gain of about $8000, and if all of it was 10 years old you'd have a gain of about $6000.  If your tax situation is such that selling all the stock at once would push you into a higher tax bracket, it might make sense to sell only enough to fit into your current bracket, and sell the rest next year.  However, I think this situation is unlikely because: A) since the stock has been held for a long time, most of the gains will be at the lower long-term rate; B) if you have solid income, you can probably afford the tax; and C) if you don't have solid income, your long-term capital gains rate will likely be zero." You can use long-term options called LEAPS to increase dividend yield. Here's how it works: Let's say you buy a dividend-yielding stock for $38 that pays an annual dividend of $2 for a 5.3% yield. Next, you SELL a deep-in-the-money LEAPS options. In this hypothetical we'll sell the $25 call option for $13. That now reduces our cost basis from $38 to $25. Since the dividend remains @ $2, our yield is now $2/$25 = 8%. Now there are issues that may need to be dealt with like early assignment of the option where rolling the option may be necessary.  More details of this strategy can be found on my website. "If you have someplace to put the money which you think will yield significantly better returns, by all means sell and buy that. On the other hand, if you think this stock is likely to recover its value, you might want to hold it, or even buy more as a ""contrarian"" investment. Buy low, sell high, as much as possible. And diversify. You need to make a judgement call about the odds. We can point out the implications, but in the end whether to sell, buy, hold or hedge is your decision. (This also suggests you need to sit down and draw up a strategy. Agonizing over every decision is not productive. If you have a plan, you make this sort of decision before you ever put money into the stock in the first place.)" Capital gain distribution is not capital gain on sale of stock. If you have stock sales (Schedule D) you should be filing 1040, not 1040A. Capital gain distributions are distributions from mutual funds/ETFs that are attributed to capital gains of the funds (you may not have actually received the distribution, but you still may have gain attributed to you). It is reported on 1099-DIV, and if it is 0 - then you don't have any. If you sold a stock, your broker should have given you 1099-B (which is not the same as 1099-DIV, but may be consolidated by your broker into one large PDF and not provided separately). On 1099-B the sales proceeds are recorded, and if you purchased the stock after 2011 - the cost basis is also recorded. The difference between the proceeds and the cost basis is your gain (or loss, if it is negative). Fees are added to cost basis.