The topic of this article is the following question: why does the stock’s yield change constantly? It is important to follow your stocks closely so that you can monitor changes.Now, all stocks are going to be constantly changing-it’s not change itself that you need to look out for, because change is inevitable (you might want to be more concerned if there is actually no change ever in your stocks).But you need to know what change is good, what change is bad, and why things do change.Following and monitoring the changes in your stock help you ensure that your stocks are increasing in value, even though it will probably be gradually, and that any decreases in value are not too dire.There are lots of things that can change a stock: diminishing value can be caused by the company changing ownership hands, a failure to update products, a failure to improve services, poor management, and so on.The opposite can lead to an improvement in the value of a stock, as investors realize that a company’s value might be increasing.
So everything about a stock will be changing, except the name.But why?And why, in particular, is the yield of a stock always changing?Well, let’s talk about what a yield actually is.The yield of a stock is another name for the rate of return on a stock.The yield is a percentage.The way that the yield of a stock is calculated is by dividing the dividend paid out by the company by the closing price of one share of stock for that particular day.So, for example, let’s say that you are going to invest in, or are thinking about investing in, Moneys-R-Us, Inc.The dividend that is paid out by the company is $3 a year.The closing price or current going price for one share of stock in the company is currently $74.3 / 74 is 0.040, so the yield of the stock is 4%.In other words, your current return on your investment in the stock is 4%.
It is easy to see and to find the yield on a stock.When you look at the stock pages in the newspaper, after the name of the company comes the dividend, or the amount of money that the company pays each stockholder perhaps once a year, or perhaps quarterly.The amount of the dividend is determined entirely by the board of directors of the company.Nobody else has any say in the matter.After the dividend comes the yield.The yield will be expressed as a percentage.If you multiply the yield by 100, you will come up with the current Return on Investment, or ROI.If you want a constantly high and immediate Return on your Investment, then playing with stocks is probably not for you, unless you only go for high yield stocks.Generally, you buy a stock expecting that the price is going to go up, and then you make your Return On Investment when you sell the stock at a higher price.Bonds, on the other hand, have a higher Return On Investment, because you make money on bonds by holding on to them for a longer period of time instead of waiting to sell them at a higher price.
The reason that the yield of a stock is constantly changing is because the yield is determined using the current price of one share.Since the share value changes daily, then the yield is going to change also. Dividends don’t change too often.So you can watch to ensure that the yield, or the Return on Investment, is going up, and you can either make your money off of the dividends that you are paid (probably $6 a year), or when the yield is significantly higher than when you first purchased, then you sell the stock and make a return on your investment.