Dividend yield is defined by the simple equation equal to dividend divided by price. High dividend yield ratio means that the denominator is low relative to the nominator. If given two identical companies, the one that has a higher dividend yield is undervalued relative to the other. If the company is truly undervalued, it means a savvy investor can buy in hope to earn a profit by shorting the overvalued company and long the undervalue stock. The question is whether the company is truly mispriced by the market or that the investor does not know something which the market does. This leads to the similar problem of having a concentrated portfolio. Here is what usually happens: HERE (clients only, login required)

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