Long term effective yield with reinvested dividends
It might be misleading to hold a stock for a long time and then check the stock profile to see the current dividend yield to get an idea of what a current holding is paying out. The power of compounded interest has been hashed and re-hashed over the years but it's worth looking at compounded interest on dividend reinvestment in terms of the growth of effective dividend yield. Let's take for example one of the stocks in my dividend portfolio. Universal Health Realty Income Trust (UHT). I've held this stock since 2015 in my retirement account when I purchased 700 shares for about $49 per share. At the time, they paid a fairly juicy 5+% dividend yield but as the stock price has risen over the last 4 years the dividend yield has fallen to about 2.69% (still nothing to sneeze at with the rates banks are paying these days). Just for clarity, dividend reinvestment (DRIP) is when you own shares in a company that pays a dividend and when the dividends are paid out, the mo