3 Metrics Dividend Investors Must Embrace to Achieve Wealth

Dividends can be a great source of income when used the right way. In fact, with time and consistency, they can even be a vital part of someone's retirement income, possibly accounting for thousands of dollars monthly.

The first thing most investors tend to focus on is dividend yields. After all, who wouldn't prefer a 10% yield over a 3% yield? But yields can be deceiving. Dividend yields are determined by dividing a company's annual dividend payout by its stock price. If a company pays out $3 per share annually and the share price is $100, the yield is 3%. If the stock price drops to $30 a share (for whatever reason), the yield is now 10%. The yield is suddenly higher, but it's only because of a sharp price drop. So investors shouldn't rely just on yield to decide a dividend stock's worthiness.

To really get the most from dividend investing and avoid falling into dividend traps, here are three metrics dividend investors should have a firm understanding of as they analyze dividend stocks.

Source Fool.com