Falling stock prices are good news for your long-term
dividend reinvestment portfolio. As prices fall, you will buy more
shares with your reinvested dividends, so you will accumulate more
shares during a price decline than if prices had remained stable
or increased. When prices move back to the upside, the value of
your portfolio will increase because of the price rise and the increased
number of shares.
And as prices fall, the dividend yield (annual dividend divided
by stock price) goes up for individual stocks. So when you buy new
shares during the price decline, your initial and future dividend
yield, which is based on your purchase price, will be higher than
if you bought the shares at higher prices.
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Posted July 28, 2007.
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