Yield-to-Growth Ratio: A Game-Changer for Investors

Today, I want to dive deep into one of the key things I look for in dividend investing: the yield-to-growth ratio.

Don’t let the name fool you. It sounds technical, but trust me, it’s straightforward and can be a game-changer for your portfolio.

What is the Yield-to-Growth Ratio?

In plain English, the yield-to-growth ratio helps you see past the big shiny dividend that a stock is offering and look at whether the stock itself is actually going to grow.

Think about it this way: There are plenty of stocks out there that pay you a nice dividend for holding them… But would you want to own a stock with a nice dividend that just keeps sinking?

Of course not! We want to collect dividends AND own stocks that have growth potential.

Many investors get lured by high dividend yields without considering whether the stock itself has room to grow. This is a classic mistake.

High yield without growth can be a dead end, especially when the stock price moves sideways or even down.

On the other hand, a balance between yield and growth can give you big gains, both in terms of income from the dividend and the stock going up in price.

A Practical Example: JP Morgan (JPM)

Let’s take JP Morgan (JPM) as an example.

It might not make the headlines for having the highest dividend yield, but it’s a top candidate when you look at yield-to-growth ratio.

JPM has a yield of around 2.3%.

Now, that might not sound like much, but check this out: JPM has been on a solid upward trend since early 2023, with its price jumping up by 49.6% over roughly the past 18 months.

Anyone who invested $50,000 in JPM back then would now be holding a stock worth around $74,817.

Plus — they’d have an additional $2,000 from the dividend, bringing the total to $76,817.

The Power of Combining Yield and Growth

This combo of yield and growth is powerful. It’s what turns so-so investments into real winners.

Think about it — you’re not just getting paid to hold the stock, but you’re also seeing its price go up.

That’s why the yield-to-growth ratio is one of my key rules for picking profit-sharing stocks.

Why You Should Care

Longer term investing isn’t just about finding stocks that are going to the moon.

And it’s not just about finding stocks that pay high dividends.

It’s about finding stocks that have a good balance of both — and that’s what the yield-to-growth ratio gives us.

But here’s the thing: Yield-to-growth isn’t the be-all, end-all.

It’s just one of three key things I look for before I add a stock to my long term dividend portfolio.

There are two more crucial factors that can make a big difference for your portfolio.

To discover the other two keys and get the full details on how I use them, click here to watch this video I recorded for you.

Trade well,

Jack Carter

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