Proceed with Caution Focusing on Yield
Investors selecting funds based on dividend yield should be aware that high yield is no assurance of higher expected return. Plotting 10-year annualized returns vs. average dividend yield for US large-cap equity funds shows no meaningful relation between the two. Many of the best-performing funds in the category had below-average yields. And funds specifically targeting high yield can be found on both ends of the return spectrum.
A stock’s total return comprises both capital appreciation and dividends. Emphasizing only one component may reduce diversification and, as the data show, may not increase your expected return.