As a general rule, the dividend and yield will be positive if the stock is soundly priced as compared to the prevailing market.

At the end of 1957, a composite of all 992 dividend-paying stocks on the New York Stock Exchange had a market price of $42.02 and a dividend of $2.56, resulting in a (median) yield of 6.1 percent.


As a rule of thumb, a stock purchased for income in such a market could be expected to yield at least 5 percent, or perhaps a bit more, say, 5.5 percent. For a 5 percent return does not automatically make a stock a sound purchase any more than one over the 6.1 percent median is automatically risky.

A median yield of 7.8 percent means that there were as many stocks paying above that figure as there were below. For the current purchaser at around 62, the yield is 4.8 percent. For the 1948 buyer, it is over 14 percent.

Very often a high percentage yield is achieved through an extra dividend; make certain that the extra represents earnings, and not the sale of productive assets, which may reduce earning power in the months ahead. Often, too, a dividend figure represents the amount “paid last year” although the prevailing price, responsive to storm signals ahead, has already retreated, thus suggesting a phenomenal—and quite unlikely—yield in the future.

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