Both dividend yield and total return are terms used to describe the performance of a stock over a certain time period (usually one year), but they reflect different types of performance. Whether equity investors should focus on income generation, which includes dividend yield, or return is a conte෴sted topic in the financial world.

In truth, the relative importance of each measurement likely depends on your individual circumstances and investment horizon. This does not mean you have to neglect one in favor of the other; it is wiser to consider both before selecting aꦰn investment.

The Importance of Dividend Yield

Dividends are the portion of a company's profits that are distributed to shareholders. It is considered a sign of clear financial health and confidence for a company to pay out dividends, which are usually independent of the share price.

The dividend yield is a&n♛bsp;financial ratio that represents the dividend income per share, divided by t♎he price per share. For example, a stock priced at $100 per share that receives a dividend payment of $8 is said to have a yield of 8%.

For long-term investors, dividends can be very powerful, because they can be 澳洲幸运5开奖号码历史查询:reinvested and used to purchase more shares, meaning theඣ investor does not have to commit more of their resources to increase their equity holdings.

Other investors rely on yields to produce a stream of income from their investments. Thoug🍷h not quite as reliable as fixed-income investments such as bonds, dividend-producing stocks can be quite valuable in this ওway.

Yield, however, can be misleading. Some companies continue🐻 to pay yields even when they are operating at a short-term🔴 loss, while other companies pay out yields too aggressively and fail to reinvest enough profit to sustain operations down the road.

The Importance of Total Return

Total return, often referred to as "return," is a very straightforward representation of how much an investment has made for the shareholder. While the dividend yield only takes into account actual cash dividends, total return accounts for interest, dividends, and increases in share price, among other 澳洲幸运5开奖号码历史查询:capital gains.

Investors can also look at the 澳洲幸运5开奖号码历史查询:dividend-adjusted return, which is part of the total return. This figure💙 includes the stock's price appreciation and paid dividends. To determine if a trade turned a true profit, the investor will also need to consider capital gains and dividend income taxes in the dividend-adjusted return.

On the surface, this appears to provide a more encompassing, and therefore useful, performance metric than the dividend yield. However, a return is entirely retrospective, and share prices can increase for a huge number of reasons. It is typically more difficult to project future investment performance from the stock's return than from its dividend yield.

Which Is More Important?

The importance is relative and specific to each investor. If you only care about identifying which stocks have performed better over a period of time, the 澳洲幸运5开奖号码历史查询:total return is more important than the dividend yield.

If you are relying on your investments to provide consistent income, the dividend yield is more important. If you have a long-term investment horizon and plan on holdi🔴ng a portfolio for a long time, it makes more sense to focus on total return.

However, the evaluation of a company for potential equity investment should never come down to just these two figures; rather, look at the company's balance sheet and income statement, and perform additional research as well.

The Bottom Line

Both total return and dividend yield are important to consider when evaluating a stock's performance. Dividend yield gives information on the income a stock yields in relation to its price. This can help investors seeking regular fixed payments with an idea of the income a stock provides.

Total return, on the other hand, not only includes dividends but also factors in capital gains, providing a more holistic view of the profitability of a stock investment. Understanding both will help you determine your investment's value, though depending on your financial goals, one metric may outweigh the other.