A Disciplined Approach to Weighting High-Dividend Yield Stocks

The interest in the stocks of companies paying higher than average dividends has been in a rapid upswing over the past couple of years as it has become readily apparent that short-term interest rates are not rising any time soon. Ben Bernanke has all but promised us years of low short-term rates. With money market funds paying less than 0.1% on average, many investors are turning to high-dividend paying stocks to supplement their income.Once the decision has been made as to which stocks will make up an investor’s high-dividend portfolio, there is still the question of how these stocks will be weighted. Some investors and financial advisors will use the tired and increasingly out of favor method of weighting by market capitalization. There is also the idea of equally weighting each stock, which has become more popular in recent years. But I suggest that there is a better method for weighting high-dividend stocks that rewards a company with a higher weight as it makes good decisions that are in the interests of shareholders.... Read more