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Both types of investments have their place within a diversified portfolio, but one must carefully examine their risk-return profile before diving in.
The Importance of Valuation
Understanding the valuation of dividend stocks is essential for making informed investment decisions. Common valuation methods include Dividend Yield Theory, Bogle’s Valuation, and the Dividend Discount Model. These metrics assess whether a stock’s current price aligns with its intrinsic value based on projected growth rates.
Being aware of how and when to apply these valuation models can help protect against making poor investment choices that could undermine long-term profitability.