well done to you if you're watching this video.

That tells me you have an interest in dividend investing

and in dividend stock strategy which is great.

It is a fantastic strategy.

I personally use it.

And if you're watching this, like I said,

that tells me that not only are you looking

to maybe get into it

but you're also concerned about well,

I saw you need to avoid some things

so I want to be smart about dividend investing

so what do I need to avoid?

And that's what I want to talk about here

is again, yes there is certainly something

that on the surface it makes you think

especially when you're new, oh wow, wow really?

Awesome.

But when you peel back the layers,

which is what I want to do here,

it's not a good situation

and it certainly needs to be avoided

if you're gonna doing a dividend investing strategy

to grow your wealth

and invest in the stock market.

And it all has to do with dividend yield.

Depending on where you are in your journey,

maybe you have seen some dividend yield

and you're thinking, "Whoa, that's gonna pay me

"that amount of a dividend?

"I'm gonna make 10-15% return?

"Wow, I'm getting that stock,

"that's a high yielding dividend."

And that's a term that gets thrown out.

Hey, high yielding dividends, high yielding dividends.

And I see lots of videos out there

and sometimes it's like, please don't be talking about...

That's not where you should be directing people to

because those are high dividends for a reason

and as I'm gonna show here,

the reason is not good.

So, why does this need to be avoided?

Well, because these are very risky companies.

These are companies that

it's not like they're sitting there,

"Yeah, we're so good, so we're gonna pay you 15%."

That's not how they arrive at a high yield.

The way they arrive is well, basically becoming

worse and worse as a company.

And the best way to explain this

is just to show you through the math

of how it all works out.

So the equation for the dividend yield

is dividend per share over the stock price.

I should note that I you have no idea

what a dividend even is, I'll put a link down below

to a video where I talk about just what is a dividend.

But, I am assuming that you know, at least,

the general principal of how a dividend works.

But that is the equation there for yield.

So, just for an example's sake,

let's say there's a company out there

and they are doing $3.00 per share.

So, every share you own in that company

you're gonna get $3.00.

And let's just say that the stock price

is currently $100.

So, over here, we're gonna track the stock price here.

And stock price $100.

So, at $100, what is that giving?

Well, not to insult your intelligence

but three divided by 100 is gonna be .03

and then, of course, remember back to elementary,

bottom multiplied by 100 to turn into a percentage.

So, 3% is what the yield is gonna be at that point in time.

3%, yeah, I mean a good solid dividend.

But time goes on and I don't know why,

but business happens, life happens, the market shifts.

You know, whatever is going on

and all of a sudden, this thing is down...

Maybe I'll just stick with green

or I'll stand here all day picking up different markers.

But this thing is down here at $80.

So, now all of a sudden, what's going on?

Well, if this number now becomes $80,

what does that math do?

Now, I have a cheat sheet up there

because I'm not that good with math

but at that point in time,

the yield would now be 3.75%.

So, from a yield perspective, that's great.

They're paying even more.

True, but how did they get to paying more?

Well, their stock price went down.

Let's keep going.

So, again, life, business happens all that.

And now, all of a sudden,

their stock price is at $50.

So over here we need to get things updated

and well, their stock price is no longer at $80,

it's at $50.

So, let's do the math on that

and I gotta cheat, look up there.

Now, all of a sudden, we're at a 6% dividend deal.

Wow, 6%?

Man, this company must be doing great,

they're paying 6% dividend?

Wait a second, do you get where I'm...

Well, how did it get to 6%?

Well, the stock price just dropped even more.

Let's do this a couple of more times.

I'm gonna cheat ahead

because we're doing this two more times.

So, we'll do there and here.

So, the next pit stop for the price is now at $25.

So, again, well, we gotta redo the math.

This is now at $25.

So you do the math on that and now, all of a sudden,

we're sitting at 12%.

12% dividend!

And if you do a search of high yields

you will see stocks out there that are at 10% and above.

And wow, I get it, it's almost like a tractor beam

you want to just walk into it and grab it

but remember, avoid it.

Why do you need to avoid it?

Again, how did the deal get that high?

Well, because the price keeps dropping of the shares.

Why do share prices drop?

Something's wrong with the company.

What is wrong with the company?

I mean, there's a lot of different reasons

and theories out for that.

But the point here being,

if yields are going up because stock prices are going down,

not good.

And then finally, just to finish this off

but, I probably hammered this home good enough.

But we'll just finish it off.

You have the stock price now at $15.

So you do the math on that and that equates to 20%.

Whoa 20%!

Yeah, well, remember when the share price used to be at $100

and now it's all the way down to $15?

Not good.

So, again, just to kind of map out the general rule here.

If, so the big if,

the dividend percentage is going up because,

and then stock price going down,

this is the exact thing that needs to be avoided.

You do not want to be out there chasing yield,

as it's called, if you want to sound smart.

Oh man, I got caught chasing yield.

If you are chasing yield,

you're not being smart, you're not considering

all the factors of how that yield got to where it was.

So, that's one thing you need to avoid.

It's very common.

I did it before.

What was that?

STON, I tried it.

And they paid me a couple of hug dividends

but then the company said fine,

we're not paying the dividend any more.

Because eventually what happens

is that companies can no longer afford

to pay the dividend.

So, when they announce that the dividend has been slashed,

guess that happens?

Well, now this price absolutely just plummets

that much further down.

And I mean it can get really, really nasty

in many situations.

So, companies, they're gonna pay that dividend

for as long as possible.

But when the dividend reaches those sorts of percentages,

yeah, it may be there temporarily,

but not for very long

and then, like I said, when the company says...

They wave the white flag.

"We can't pay for it anymore."

See ya later, stock price.

That's gonna plummet it that much more.

Again, I want to reiterate, I'm not here saying

that dividend investing is a stupid strategy.

No, it's a great strategy

but you gotta make sure you avoid certain pitfalls out there

and chasing yield, again,

just focusing on strictly the yield itself

is something that definitely needs to be avoided.

So, if you have any questions,

leave those down below.

Maybe, let me know this,

what are some of your favorite dividend stocks

that you're invested in

and do you have any horror stories?

Do you have any stories where you did chase the yield

and then you got burnt by it?

Like I said, STON was my kind of high dividend yield thing

that I chased and got burned.

Luckily, I kind of knew it going in

so it's not like I threw my entire life savings into it.

It was just a little bit.

Let's see if this thing can turn around.

But, no, it didn't turn around.

So, yeah, leave any horror stories down below

or just let me know

what some of your favorite dividend stocks are out there.

I'd love to hear that from ya.

And if you enjoyed the video

and would like for me to keep making these sorts,

hit that like button and subscribe to the channel,

lots of other videos on the channel.

So, check it out and if anything though,

just hit that like button and leave a comment down below

and I'm very curious to hear

what stocks you're looking at.

And who doesn't like a good horror story?

So leave those down below too.

And I'll see you back for the next video.

First off, thanks so much for watching the entire video.

Real quick before you go,

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web class, training, workshop, online event,

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But it will be me, live revealing to you

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I'm gonna cover three keys that have helped me

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The first key is super weird

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The second key is super awesome because

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I'll explain it all, though,

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And yeah, the third key, when you hear it,

sounds way too good to be true,

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