Compounding Dividends

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Payout Ratio Cheat Sheet 1️⃣ What is a payout ratio? The payout ratio measures the percentage of the company’s earnings it pays in dividends. 2️⃣ Why is it important? The payout ratio helps determine if the dividend is sustainable. Most investors consider a sustainable payout ratio to be 50% or less. 3️⃣ Low versus high payout ratio? •   A low payout ratio indicates that the company is reinvesting most earnings into growing the business •   A payout ratio over 100% indicates that the company is paying out more dividends than what it earns 4️⃣ How do you calculate it? Payout Ratio = Annual dividend payment per share ÷ earnings per share 5️⃣ Payout Ratio vs Dividend Yield •   Dividend Yield: Return on investment from dividends (how much you get). •   Payout Ratio: Percentage of earnings paid as dividends (how much it costs the company).

Investing in dividend stocks can be very attractive. It’s nice to receive a cash payment frequently. But what are dividends and which metrics should you take into account? Let’s teach you everything you need to know. 1️⃣ What are dividends? A dividend is simply a way for companies to return money to shareholders. When a company makes a profit, the managers decide what to do with it. They have 5 basic choices: - Invest in growing the business - building more factories, advertising, etc. - Grow by buying another company through a merger or acquisition - Pay down debt - Buy back stock - Pay a dividend Good managers will make these decisions based on what’s best for the company (and its shareholders) in the long run. Sometimes that means paying a dividend, sometimes it doesn’t. 📚 Want to read the entire article? Read it here: https://lnkd.in/e7hDMW_W

Put the power of dividends to work. These 15 visuals will help you: - Annual dividends of Warren Buffett - Dividends every month - Dividend stocks - Dividend growth - Dividend kings - The best dividend ETFs - How to earn $1,000 per year in dividends - Best dividend stocks - Buy & Hold Dividend Stocks - How to get paid monthly dividend income - Attractive dividend yields - 48 Stocks to earn monthly income - 12 of the top dividend stocks - 30 Companies with strong and stable dividends - Consistent dividend kings 📚 Grab the PDF in high resolution here: https://lnkd.in/eF-zPjjc

Financial Ratios you should know Here are 27 ratios everyone should know: 1. Current ratio = Current assets ÷ Current liabilities 2. Quick ratio = (Cash + Short-term marketable investments + Receivables) ÷ Current liabilities 3. Cash ratio = (Cash + Short-term marketable investments) ÷ Current liabilities 4. Defensive interval ratio = (Cash + Short-term marketable investments + Receivables) ÷ Daily cash expenditures 5. Receivables turnover ratio = Total revenue ÷ Average receivables 6. Days of sales outstanding (DSO) = Number of days in period ÷ Receivables turnover ratio 7. Inventory turnover ratio = Cost of goods sold ÷ Average inventory 8. Days of inventory on hand (DOH) = Number of days in period ÷ Inventory turnover ratio 9. Payables turnover ratio = Purchases ÷ Average trade payables 10. Number of days of payables = Number of days in period ÷ Payables turnover ratio 11. Cash conversion cycle (net operating cycle) = DOH + DSO – Number of days of payables 12. Working capital turnover ratio = Total revenue ÷ Average working capital 13. Fixed asset turnover ratio = Total revenue ÷ Average net fixed assets 14. Total asset turnover ratio = Total revenue ÷ Average total assets 15. Gross profit margin = Gross profit ÷ Total revenue 16. Operating profit margin = Operating profit ÷ Total revenue 17. Pretax margin = Earnings before tax but after interest ÷ Total revenue 18. Net profit margin = Net income ÷ Total revenue 19. Operating return on assets = Operating income ÷ Average total assets 20. Return on assets = Net income ÷ Average total assets 21. Return on equity = Net income ÷ Average shareholders’ equity 22. Return on invested capital (pre-tax) = Earnings before interest and taxes ÷ (Average Interest-bearing debt + Average Shareholders’ equity) 23. Return on invested capital = [(Earnings before interest and taxes) x (1- Effective Tax Rate)] ÷ (Average Interest-bearing debt + Average Shareholders’ equity) 24. Return on common equity = (Net income – Preferred dividends) ÷ Average common shareholders’ equity 25. Tax burden = Net income ÷ Earnings before taxes 26. Interest burden = Earnings before taxes ÷ Earnings before interest and taxes 27. EBIT margin = Earnings before interest and taxes ÷ Total revenue Source: CFA Institute 📚 You want to learn more? Download a full Financial Ratios Cheat Sheet here: https://lnkd.in/eXBkEW3W

How to analyze a balance sheet 1️⃣ Working Capital This measures a company's ability to meet its short-term obligations. A positive working capital indicates that the company has enough assets to cover its liabilities. 2️⃣ Current Ratio This measures a company's ability to pay its current liabilities with its current assets. A ratio of 1:1 is considered ideal. 3️⃣ Quick Ratio This is a more stringent measure of a company's liquidity, as it only includes highly liquid assets in the calculation. 4️⃣ Debt to Equity Ratio The proportion of a company's financing that comes from debt versus equity. A high ratio may indicate that a company is taking on too much debt. 5️⃣ Debt to Assets Ratio The proportion of a company's assets that are financed through debt. A high ratio may indicate that a company is taking on too much debt. 6️⃣ Asset Turnover Ratio This measures a company's ability to generate revenue from its assets. A higher ratio indicates more efficient use of assets. 7️⃣ Return on Assets (ROA) The efficiency with which a company generates profits from its assets. A higher ROA indicates that the company uses its assets more effectively. 8️⃣Return on Equity (ROE) The profitability of a company in relation to the equity invested in it. A higher ROE indicates that the company generates more profits for its shareholders. 9️⃣ Days Sales Outstanding (DSO) The average number of days a company takes to collect payment from its customers. A lower DSO indicates a more efficient collection of accounts receivable. 🔟 Inventory Turnover Ratio The speed at which a company sells its inventory. A higher ratio indicates that the company is efficiently managing its inventory and generating sales. This beautiful visual was made by Christian Wattig. He's a great follow for FP&A! __ 📚 You liked this? Sign up to my newsletter and receive a course which helps you to analyze Financial Statements like a professional: https://lnkd.in/ewnHQ_Sw

Ratios everyone should know to be a successful investor. 1️⃣ Liquidity and efficiency ▪️Current ratio: short-term debt-paying ability ▪️Acid-test ratio: immediate short-term debt-paying ability ▪️Accounts receivable turnover: Efficiency of collection ▪️Inventory turnover: Efficiency of inventory management ▪️Days' sales uncollected: Liquidity of receivables ▪️Days' sales in Inventory: Liquidity of inventory ▪️Total asset turnover: Efficiency of assets in producing sales 2️⃣ Solvency ▪️Debt ratio: Creditor financing and leverage ▪️Equity ratio: Owner financing ▪️Debt-to-equity ratio: Debt versus equity financing ▪️Times interest earned: Protection in meeting interest payments 3️⃣ Profitability ▪️Profit margin ratio: Net income in each sales dollar ▪️Gross margin ratio: Gross margin in each sales dollar ▪️Return on total assets: Overall profitability of assets ▪️Return on common shareholders' equity: Profitability of owner investment ▪️Book value per common share: Liquidation at reported amounts ▪️Basic earnings per share: Net income per common share 4️⃣ Market Prospects ▪️ Price-earnings ratio: Market value relative to earnings ▪️ Dividend yield: Cash returns per common share 📚If you enjoyed this piece, please hit the “Like” button. Thank you for your support! __ 💡Download 50 more investment insights like this one here: https://lnkd.in/epJNgDvz

The 25 best quotes of Charlie Munger 1. Investing is where you find a few great companies and then sit on your ass. 2. The big money is not in buying or selling, but in the waiting. 3. Like Warren, I had a considerable passion to get rich, not because I wanted Ferrari's - I wanted the independence. I desperately wanted it. 4. We have a passion for keeping things simple. 5. Assume life will be really tough, and then ask if you can handle it. If the answer is yes, you've won. 6. Think of the basic intellectual dishonesty that comes when you start talking about adjusted EBITDA. You're almost announcing you're a flake. 7. If investing wasn't hard, everyone would be rich. 8. You don't have to be brilliant, only a little bit wiser than the other guys, on average, for a long, long time. 9. The desire to get rich fast is pretty dangerous. 10. Those who keep learning will keep rising in life. 11. There is no way you can live an adequate life without making mistakes. 12. Acknowledging what you don't know is the dawning of wisdom. 13. No wise pilot, no matter how great his talent and experience, fails to use a checklist. 14. There is no better teacher than history in determining the future. There are answers worth billions of dollars in 30$ history books. 15. A lot of people with high IQs are terrible investors because they've got terrible temperaments. 16. It's waiting that helps you as an investor and a lot of people just can't stand to wait. If you didn't get the deferred -gratification gene, you've got to work very hard to overcome that. 17. You don't have to be brilliant, only a little bit wiser than the other guys, on average, for a long, long time. 18. One of the greatest ways to avoid trouble is to keep it simple... the system often goes out of control. 19. Knowing what you don't know is more useful than being brilliant. 20. If a business earns 18% on capital over 20 or 30 years, even if you pay an expensive looking price, you’ll end up with a fine result. 21. Forgetting your mistakes is a terrible error if you’re trying to improve your cognition. Reality doesn’t remind you. Why not celebrate stupidities in both categories? 22. You need patience, discipline, and agility to take losses and adversity without going crazy. 23. Everywhere there is a large commission, there is a high probability of a rip-off. 24. It takes character to sit with all that cash and to do nothing. I didn't get to the top where I am by going after mediocre opportunities. 25. We both (Warren Buffett) insist on a lot of time being available almost every day to just sit and think. That is very uncommon in American business. We read and think. __ 📚 Sign up here if you want to receive my free Financial Analysis course and plenty of other free investment resources: https://t.co/cwPWWDTvzO

Investing versus trading Are you a trader or an investor? Investors make money for themselves. Traders make money for their brokers. "In investing, always remember that Rome was not built in a day." "In trading, always remember that Hiroshima and Nagsaki were destroyed in a day." Here are 10 essential lessons to always keep in mind: 1️⃣ Let your winners run Selling your winners too early is a big mistake. Selling companies that are doing well and purchasing ones that are faring poorly is like watering the weeds and cutting the flowers. 2️⃣ Don't invest in disruptive sectors Disruption is the worst enemy of every quality investor. Invest in companies that will still be in business 10 years from now. 3️⃣ Run your own race Don't compare yourself to others. Every investor is unique and has its own goals. 4️⃣ Focus on the moat A sustainable competitive advantage is essential for quality investors. You avoid a lot of value traps when you only invest in wide moat stocks. 5️⃣ Valuation matters Even the most beautiful companies can be terrible investments if you pay too much for them. Try to buy wonderful businesses at fair prices. 6️⃣ Focus on management You don't want to invest in companies where management puts their own interest above the one of shareholders. Focus on companies with high integrity. 7️⃣ Never panic buy or sell Always try to stay rational. The worst time to make an investment decision is when you're panicking. 8️⃣ Always take responsibility Never blame others or external factors for your investment mistakes. Focus on process over outcome and take responsibility. 9️⃣ Be patient The best investors trade very little. Don't be in a rush to get wealthy. 🔟 Focus on the fundamentals Most stock prices fluctuate with more than 50% each year. But this doesn't mean the value of the company fluctuates with 50% per year. Always focus on the evolution of the intrinsic value of the companies you own. __ 📚 Sign up here if you want to receive my free e-book about investing and Financial Analysis course: https://t.co/cwPWWDTvzO

100 Great business books These books are full of wisdom Here are my favorite ones: 1.   "The Lean Startup" by Eric Ries 2.   "Good to Great" by Jim Collins 3.   "Start with Why" by Simon Sinek 4.   "Zero to One" by Peter Thiel 5.   "The Innovator's Dilemma" by Clayton Christensen 6.   "Thinking, Fast and Slow" by Daniel Kahneman 7.   "The 7 Habits of Highly Effective People" by Stephen R. Covey 8.   "The Tipping Point" by Malcolm Gladwell 9.   "Built to Last" by Jim Collins and Jerry I. Porras 10.   "Influence: The Psychology of Persuasion" by Robert B. Cialdini 11.   "Originals: How Non-Conformists Move the World" by Adam Grant 12.   "Blue Ocean Strategy" by W. Chan Kim and Renée Mauborgne 13.   "The Hard Thing About Hard Things" by Ben Horowitz 14.   "Leaders Eat Last" by Simon Sinek 15.   "How to Win Friends and Influence People" by Dale Carnegie 16.   "Delivering Happiness" by Tony Hsieh 17.   "Thinking in Bets" by Annie Duke 18.   "The Art of War" by Sun Tzu 19.   "Grit: The Power of Passion and Perseverance" by Angela Duckworth 20.   "Leadership and Self-Deception" by The Arbinger Institute 21.   "The E-Myth Revisited" by Michael E. Gerber 22.   "Measure What Matters" by John Doerr 23.   "Creativity, Inc." by Ed Catmull and Amy Wallace 24.   "Made to Stick" by Chip Heath and Dan Heath 25.   "The Power of Habit" by Charles Duhigg 26.   "Thinking, Fast and Slow" by Daniel Kahneman 27.   "The One Thing" by Gary Keller and Jay Papasan 28.   "Rework" by Jason Fried and David Heinemeier Hansson 29.   "The 4-Hour Workweek" by Timothy Ferriss 30.   "Lean In" by Sheryl Sandberg 31.   "The Warren Buffett Way" by Robert G. Hagstrom 32.   "The Art of Possibility" by Rosamund Stone Zander and Benjamin Zander 33.   "The Culture Code" by Daniel Coyle 34.   "Originals" by Adam Grant 35.   "Deep Work" by Cal Newport 36.   "Hooked: How to Build Habit-Forming Products" by Nir Eyal 37.   "The Innovators" by Walter Isaacson 38.   "The Thank You Economy" by Gary Vaynerchuk 39.   "The Wealth of Nations" by Adam Smith 40.   "The Start-Up of You" by Reid Hoffman and Ben Casnocha 41.   "The Lean Product Playbook" by Dan Olsen 42.   "Multipliers" by Liz Wiseman 43.   "Sapiens: A Brief History of Humankind" by Yuval Noah Harari 44.   "The Goal" by Eliyahu M. Goldratt 45.   "The Psychology of Money" by Morgan Housel 46.   "The Effective Executive" by Peter F. Drucker 47.   "Measure What Matters" by John Doerr 48.   "The Design of Everyday Things" by Don Norman 49.   "Shoe Dog" by Phil Knight 50.   "Mindset: The New Psychology of Success" by Carol S. Dweck 📚If you enjoyed this piece, please hit the “Like” button. Thank you for your support! __ 💡If you liked this, you'll LOVE my free Investing E-book. Grab it here: https://lnkd.in/e-nD57RA