Why do you think yield is so important for investors?
- Thread starter Caseyjones
- Start date
Yield is the ratio of income to capital invested. If a company has a yield of 10%, that means it earned $10 for every $100 it invested, which is pretty good.
There are two main reasons why investors care about yield:
1. Yield is a measure of how much cash flow a company generates, and investors want to know whether or not they're getting their money's worth in terms of dividends.
2. Yield helps investors determine whether or not they can afford the risk associated with investing in a particular security or asset class at all. If there's no yield on your investment, you'll never see any return on your money—which makes it hard to justify the risk.