What's the difference between a high yield dividend stock vs a growth stock?
"I think Fidelity has a very nice introduction to Growth vs Value investing that may give you the background you need.  People love to put stocks in categories however the distinction is more of a range and can change over time. JB King makes a good point that for most people the two stocks you mentioned would both be considered value right now as they are both stable companies with a significant dividend.  You are correct though Pfizer might be considered ""more growth."" A more drastic example would be the difference between Target and Amazon.  Both are retail companies that sell a wide variety of products.  Target is a value company: a established company with stable revenues that uses its income to give a fairly stable dividend.  Amazon is a growth company: that is reinvesting its revenues back into the corporation to grow itself as fast as possible.   The price of the Amazon stock reflects what people think will be future growth (future income) for the company.  Whereas Target's price appears to be based on the idea that future income will be similar to current income.  You can see why growth companies like Amazon might be more risky as that growth you paid a high price for may not be realized, but the payout may be much higher as well." "The two are not incompatible. This is particularly true of Glaxo and Pfizer, two drug companies operating in roughly the same markets with similar products. Many ""good"" companies offer a combination of decent yields and growth. Glaxo and Pfizer are both among them. There is often (not always), a trade-off between high yield and high growth. All other things being equal, a company that pays out a larger percentage of its profits as dividends will exhibit lower growth. But a company may have a high yield because of a depressed price due to short term problems. When those problems are fixed, the company and stock grows again, giving you the best (or at least the better) of both worlds." The general difference between high dividend paying stocks and growth stocks is as follows: 1) A high dividend paying stock/company is a company that has reached its maximum growth potential in a market and its real growth (that is after adjustment of inflation) is same (more or less) as the growth of the economy. These companies typically generate a lot of cash (Cash Cow) and has nowhere to really invest the entire thing, so they pay high dividends. Typically Fast Moving Consumer Goods (FMCG) ,Power/Utility companies, Textile (in some countries) come into this category. If you invest in these stocks, expect less growth but more dividend; these companies generally come under 'defensive sector' of the market i.e. whose prices do not fall drastically during down turn in a market. 2) Growth stocks on the other hand are the stocks that are operating in a market that is witnessing rapid growth, for example, technology, aerospace etc. These companies have high growth potential but not much accumulated income as the profit is re-invested to support the growth of the company, so no dividend (you will be typically never get any/much dividend from these companies). These companies usually (for some years) grow (or at least has potential to grow) more than the economy and provide real return. Usually these companies are very sensitive to results (good or bad) and their prices are quite volatile. As for your investment strategy, I cannot comment on that as investment is a very subjective matter. Hope this helps 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. If you are looking to re-invest it in the same company, there is really no difference. Please be aware that when a company announces dividend, you are not the only person receiving the dividend. The millions of share holders receive the same amount that you did as dividend, and of course, that money is not falling from the sky. The company pays it from  their profits. So the day a dividend is announced, it is adjusted in the price of the share. The only reason why you look for dividend in a company is when you need liquidity. If a company does not pay you dividend, it means that they are usually using the profits to re-invest it in the business which you are anyway going to do with the dividend that you receive. (Unless its some shady company which is only established on paper. Then they might use it to feed their dog:p).  To make it simpler lets assume you have Rs.500 and you want to start a company which requires Rs 1000 in capital : - 1.) You issue 5 shares worth Rs 100 each to the public and take Rs 100 for each share. Now you have Rs 1000 to start your company. 2.) You make a profit of Rs 200. 3.) Since you own majority of the shares you get to make the call whether to pay Rs.200 in dividend, or re-invest it in the business. Case 1:- You had issued 10 shares and your profit is Rs 200. You pay Rs. 20 each to every share holder. Since you owned 5 shares, you get 5*20 that is Rs.100 and you distribute the remaining to your 5 shareholders and expect to make the same or higher profit next year. Your share price remains at Rs.100 and you have your profits in cash. Case 2:- You think that this business is awesome and you should put more money into it to make more. You decide not to pay any dividend and invest the entire profit into the business. That way your shareholders do not receive anything from you but they get to share profit in the amazing business that you are doing. In this case your share price is Rs. 120 ((1000+200)/10) and all your profits are re-invested in the business. Now put yourself in the shareholders shoes and see which case suits you more. That is the company you should invest in.  Please note: - It is very important to understand the business model of the company before you buy anything! Cheers,
"Another factor to consider, beyond the fact that growth and volatility go together, is that the times when many people will need to liquidate their investments will correlate with the times that many other people need to liquidate their investments, and such correlation will push down the immediate value of those investments. While certificates of deposit have penalties for early withdrawal, one can establish up front what the worst-case penalty would be for cashing it in at the most inopportune time.  By contrast, stocks offer no such assurance.  Stocks sometimes have weird downward spikes that may be short-lived, but if life circumstances force one to liquidate stocks during such a downward spike the ""penalty"" can be much larger than on a CD." You might want to look up Dividend Yield Trap. Many stocks with high dividend yields got that way not because they decided to increase their dividend, but because their prices have dropped. Usually the company is not in good shape and will reduce their dividend, and you're stuck with a low-yield stock which has also decreased in price. In the scenario you describe, the first thing I would look at would be liquidity.  In other words, how easy is it to buy and sell shares.  If the average daily volume of one share is low compared to the average daily volume of the other, then the more actively traded share would be the more attractive.  Low volume shares will have larger bid-offer spreads than high volume shares, so if you need to get out of position quickly you will be at risk of being forced to take a lowball offer. Having said that, it is important to understand that high yielding shares have high yields for a reason.  Namely, the market does not think much of the company's prospects and that it is likely that a cut in the dividend is coming in the near future. In general, the nominal price of a share is not important.  If two companies have equal prospect, then the percentage movement in their share price will be about the same, so the net profit or loss you realise will be about the same. In my mind its not the same.   If growth is stock value then this is incorrect because of compound interest in stock price. $100 stock price after one year would be $105 and a dividend would be $2 Next year the stock would be  $110.20 (Compound Interest) and would the Dividend really go up in lock step with the stock price? Well probably not, but if it did then maybe you could call it the same. Even if the dollars are the same the growth rate is more variable than the dividends so its valuable to segregate the two. I am open to criticism, my answer is based on my personal experience and would love to hear contrary positions on this. Technically, the difference between dividends and growth ought to be that dividends can be reinvested in stocks other than the one that paid them, which is a definite advantage if you actually have a strategy.  Dividend -paying stocks used to be preferred for exactly that reason, back in the days when fewer people were directly playing in the market and more knew what they were doing. Unfortunately,  getting a periodic dividend from a stock whose price is relatively steady isn't as exciting a game as watching your stock's value bounce around and (hopefully)  creep upward on a second-by-second basis. Those who are thinking in gambling terms rather than investment terms -- or who think they can beat the pros at high frequency trading, comment withheld -- want the latter, and have been putting a lot of pressure on companies to operate in the latter mode. That doesn't make it better -- certainly not for the longer-term investors -- just more fashionable. And fashion often means getting stuck with something impractical because everyone else is doing it. On this, I second Scrooge:  Humbug! And the fact that if notes trade up high enough they tend to get taken out with lower yielding notes (pending the call schedule), so in theory there is more limited upside in high-yield, whereas equity could theoretically trade to infinity.  The positives for high-yield is that they generate monthly cash flow via coupon payments and have less down-side relative to equities. Naturally this lower down-side comes at the expense of lower up-side as well. "The difference between dividend and growth in mutual funds has to do with the types of stocks the mutual fund invests in. Typically a company in the early stages are considered growth investments. In this phase the company needs to keep most of its profits to reinvest in the business. Typically once a company gets a significant size the company's growth prospects are not as good so the company pays some of its profits in the form of a dividend to the shareholders.  As far as which is the best buy is totally a personal choice. There will be times when one is better then the other. Most likely you will want to ""diversify"" and invest in both types." for buying: High PE, low debt, discount = win. a company with high debt (in relation to revenues and cash on hand) will have to pay interest and pay off the debt, stunting their growth. and just like a normal person, will barely be able to pay their bills and keep borrowing and might go bankrupt determining discount is just looking for a technical retracement to a support level or lower. (but if you dont enter at the support level, you most likely missed the best entry) 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. For bonds bought at par (the face value of the bond, like buying a CD for $1000) the payment it makes is the same as yield. You pay $1000 and get say, $40 per year or 4%. If you buy it for more or less than that $1000, say $900, there's some math (not for me, I use a finance calculator) to tell you your return taking the growth to maturity into account, i.e. the extra $100 you get when you get the full $1000 back. Obviously, for bonds, you care about whether the comp[any or municipality will pay you back at all, and then you care about how much you'll make when then do. In that order. For stocks, the picture is abit different as some companies give no dividend but reinvest all profits, think Berkshire Hathaway. On the other hand, many people believe that the dividend is important, and choose to buy stocks that start with a nice yield, a $30 stock with a $1/yr dividend is 3.3% yield. Sounds like not much, but over time you expect the company to grow, increase in value and increase its dividend. 10 years hence you may have a $40 stock and the dividend has risen to $1.33. Now it's 4.4% of the original investment, and you sit on that gain as well. After searching a bit and talking to some investment advisors in India I got below information. So thought of posting it so that others can get benefited. This is specific to indian mutual funds, not sure whether this is same for other markets. Even currency used for examples is also indian rupee. A mutual fund generally offers two schemes: dividend and growth. The dividend option does not re-invest the profits made by the fund though its investments. Instead, it is given to the investor from time to time. In the growth scheme, all profits made by the fund are ploughed back into the scheme. This causes the NAV to rise over time. The impact on the NAV The NAV of the growth option will always be higher than that of the dividend option because money is going back into the scheme and not given to investors.  How does this impact us? We don't gain or lose per se by selecting any one scheme. Either we make the choice to get the money regularly (dividend) or at one go (growth). If we choose the growth option, we can make money by selling the units at a high NAV at a later date. If we choose the dividend option, we will get the money time and again as well as avail of a higher NAV (though the NAV here is not as high as that of a growth option). Say there is a fund with an NAV of Rs 18. It declares a dividend of 20%. This means it will pay 20% of the face value. The face value of a mutual fund unit is 10 (its NAV in this case is 18). So it will give us Rs 2 per unit. If we own 1,000 units of the fund, we will get Rs 2,000. Since it has paid Rs 2 per unit, the NAV will fall from Rs 18 to Rs 16. If we invest in the growth option, we can sell the units for Rs 18. If we invest in the dividend option, we can sell the units for Rs 16, since we already made a profit of Rs 2 per unit earlier. What we must know about dividends The dividend is not guaranteed. If a fund declared dividends twice last year, it does not mean it will do so again this year. We could get a dividend just once or we might not even get it this year. Remember, though, declaring a dividend is solely at the fund's discretion; the periodicity is not certain nor is the amount fixed. First and foremost you need to be aware of what you are comparing. In this case, HSBC as traded on the NYSE exchange is not common shares, but an ADR (American Depository Receipt) with a 5:1 ratio from the actual shares. So for most intents and purposes owning one ADR is like owning five common shares. But for special events like dividends, there may be other considerations, such as the depository bank (the institution that created the ADR) may take a percentage. Further, given that some people, accounts or institutions may be required to invest in a given country or not, there may be some permanent price dislocation between the shares and the ADR, which can further lead to discrepancies which are then highlighted by the seeming difference in dividends. "The difference between TMUSP and TMUS is that the ""with P"" ticker is for a TMobile Preferred Stock offering.  The ""without P"" ticker is for TMobile common stock.  The difference between the apparent percentage yields is due to Yahoo! Stock misreporting the dividend on the preferred stock for the common stock, which has not paid a dividend (thanks Brick for pointing this out!) Preferred stock holders get paid first in the event of liquidation, in most scenarios they get paid first.  They sometimes get better returns.  They typically lack voting rights, and after a grace period, they may be recalled by the company at a fixed price (set when they were issued). Common stock holders can vote to alter the board of directors, and are the epitome of the typical ""I own a trivial fraction of the company"" model that most people think of when owning stocks. As the common stock is valued at much less, it appears that the percent yield is much higher, but in reality, it's 0%." Yield can be thought of as the interest rate you would receive from that investment in the form of a dividend for stocks or interest payments on a bond.  The yield takes into account the anticipated amount to be received per share/unit per year and the current price of the investment.   Of course, the yield is not a guaranteed return like a savings account.  If the investment yield is 4% when you buy, it can drop in value such that you actually lose money during your hold period, despite receiving income from the dividend or interest payments. Transit FSAs have $255 limits for each of {parking, public transit} per month, considered on a monthly basis separately; and that limit applies both to funding and to claims. You may fund your transit FSA with up to $255 per month for each purpose.  You may withdraw up to $255 per month for each purpose.  The amounts each month don't have to match, but they do need to each be under the maximum.   Any amount you spend over $255 for either parking or public transit would need to be funded with post-tax money.  Most transit FSAs have a mechanism for adding a credit card to the account to allow this to be seamless and on-demand (as opposed to be declared in advance). You can change your deduction each month, up to the limit your benefits provider permits (for me for example, I can choose up to the 10th of the prior month what to do). This differs from health care FSAs, which are annual in nature, and must be entirely defined during open enrollment - but as they have annual limits, would allow you to use the full amount even when employed for only half the year.