That's what happened to Woolworth a few years ago. Most Dow companies, which are chosen for their financial stability, don't get themselves into that kind of situation, though, although it is not uncommon among some smaller high yielding companies. With Dow stocks, the low price is usually a result of bad short-term outlook or some kind of temporary setback, not a situation that threatens to destroy the company. Not every high yield stock turns around, but enough of them head north again to give the High Yield 10 strategy a 3 percentage point advantage over the Dow as a whole. The Foolish Four looks at both yield AND price.
Yield already levels the playing field.
Yield tells you what each dollar's worth of dividends will cost you, regardless of the stock price. Price, however, has an impact on how much and how quickly a stock's price moves. This, of course is an academic finding, which means it is true when you look at large numbers of stocks, but there are also many exceptions. So buying a lower-priced high yielding stock is a way to hitch a ride on that volatility when it is going in the right direction. It uses the ratio between a stock's yield and its price, but not the straight price.