# Sooo... what's the catch?



## Tyler Durden (17 March 2011)

I've just had a look at some shares offering high dividend yields, and some are pretty ridiculous:

AYT - 62.85%
RCU - 55.55%
LMC - 29.07%
MUE - 24.32%
SGI - 17.54%

I'm sure there's a catch, or else everyone else would own these shares, but I've too newbie-ish to identify it. Any help?


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## BrightGreenGlow (17 March 2011)

Tyler Durden said:


> I've just had a look at some shares offering high dividend yields, and some are pretty ridiculous:
> 
> AYT - 62.85%
> RCU - 55.55%
> ...




Havent looked into them but I'd say the yield is high due to a terrible drop in SP. This doesnt mean they will pay a high yield in the future. It's just the way its calculated the latest dividend with a newer SP.


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## Whiskers (17 March 2011)

BrightGreenGlow said:


> Havent looked into them but I'd say the yield is high due to a terrible drop in SP. This doesnt mean they will pay a high yield in the future. It's just the way its calculated the latest dividend with a newer SP.




I haven't looked either, but also  sometimes a company will pay a special dividend or return some capital to shareholders, which can inflate the yield in the short term.


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## Bill M (18 March 2011)

Tyler Durden said:


> I've just had a look at some shares offering high dividend yields, and some are pretty ridiculous:
> 
> AYT - 62.85%
> RCU - 55.55%
> ...




Never heard of any of them and would not even look at it.


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## skc (18 March 2011)

Tyler Durden said:


> I've just had a look at some shares offering high dividend yields, and some are pretty ridiculous:
> 
> AYT - 62.85%
> RCU - 55.55%
> ...




The catch is you should do more research on a company rather than just scroll down the list of yield leader


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## tothemax6 (18 March 2011)

Tyler Durden said:


> I've just had a look at some shares offering high dividend yields, and some are pretty ridiculous:
> 
> AYT - 62.85%
> RCU - 55.55%
> ...



The catch is at those dividend yields there is a high chance the company is a dog. And a _smelly_ dog at that. Same reason 'junk' bonds have high yields.
Typically it is caused by the share price plummeting, not the dividends increasing - hence creating a high yield that way. Although sometimes it can simply be because people don't see any future in the company and they don't want to risk investment in spite of the increasing dividend.


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## pixel (18 March 2011)

Tyler Durden said:


> I've just had a look at some shares offering high dividend yields, and some are pretty ridiculous:
> 
> AYT - 62.85%
> RCU - 55.55%
> ...



 Yield is *last year's* dividend divided by *today's* share price.
While we're at it:
Price/Earnings often quoted is *today's* price divided by *last year's* earnings, 
or sometimes, they use a *guess* of *future *earnings. 

All that may be OK for "solid" companies with a good reputation; but if you know a company has a good reputation, well managed and all that - why would you worry about such "off the scale" P/Es or yield figures?

Just take it in and mull over it. Before long you'll know why many traders - yours truly included - don't give a rat's tutu for that kind of funnymentals


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## Tyler Durden (18 March 2011)

pixel said:


> Yield is *last year's* dividend divided by *today's* share price.




I see, that would make a lot of sense, thanks.


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## So_Cynical (18 March 2011)

AYT = Adelaide yield trust

Winding up the fund and thus giving all the money back to the unit holders.


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