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Dividend Yield vs Dividend Payout vs Dividend Rate When investing in stocks, one of the exciting aspects is the potential to receive dividends. Let's break down these concepts Stock Price: Rs 350 FY24 Dividend Declared: Rs 10.5 Face Value: Rs 10 FY24 Earnings Per Share: Rs 70 Dividend Yield This metric shows what you earn on your investment in terms of dividends. It's calculated based on the market price you pay for the stock. For our example: Dividend Yield=(Dividend Per ShareStock Price)×100 =(10.5350)×100=3% This means, as an investor, you are earning about 3% of your stock purchase price back as dividends. Dividend Payout This figure indicates how much of its profit a company is distributing to shareholders as dividends. Dividend Payout=(Dividend Per ShareEarnings Per Share)×100 =(10.570)×100=15% In this scenario, the company is distributing 15% of its earnings to shareholders, retaining the remaining 85% for reinvestment in business growth. This balance can show how a company views its growth opportunities; companies with fewer growth opportunities might opt to distribute more of their profits as dividends. Dividend Rate Often quoted by companies but less meaningful for investors and analysts, this is calculated as: Dividend Rate=(Dividend Per ShareFace Value)×100 =(10.510)×100=105% The dividend rate here is 105%, but as mentioned, this number isn't particularly useful for evaluating the quality of an investment since it doesn’t provide insight into the returns relative to the stock price or earnings. In conclusion, when analyzing stocks for investment: - Dividend Yield provides a clear picture of what percentage of the purchase price is returned as dividends, helping gauge the immediate return on investment. - Dividend Payout helps understand how much of its profits a company is giving back to its shareholders versus how much it is reinvesting. Follow Chakravarthy V for more insightful posts on #personalfinance, #wealthmanagement and #investing.

Dividend Yield Trap A lot of investors buy high dividend yield stocks but that’s not a right approach. Let’s understand through an example: 1. Let’s imagine this company is making a Earning Per Share of Rs 10 that is total profit divide by total outstanding share. 2. Now if we see the company has dividend pay out ratio is 50% 3. That means on profit per share earned company will give 50% as dividend that will come out to be 5 Rs dividend per share. 4. Now assuming the current market price of stock is 100 5. That means if you buy 1 share at 100 Rs the company would have given you 5 Rs of dividend 6. That means your return through dividend would be 5%. 7. Now, lot of people think that total stock market return is equal to price appreciation + dividend yield. 8. So they think 5% will be generated through dividend only so we can easily buy the stock 9. But they forget a very important thing this is not about the past dividend yield it is about the expected dividend yield. 10. Let’s imagine the company at the end of 1st year reported a profit of 70 crore due to lower profit correct they decided to give a dividend of only 20% 11. That means on a earning per share of 7 Rs we will only get dividend of 1.4 Rs . 12. Now we bought the stock at 100 Rs but we ended up getting a dividend of only 1.4 13. that means a dividend yield of only 1.4% alright. 14. So, always think about expected dividend yield as compared to the past dividend yield. #dividend #stocks #stockmarket #financetips #investing #stocktips #indianstockmarket #finnacle

The dividend is the amount of money that a company pays to its shareholders as dividends on a per-share basis. On the other side, the dividend yield indicates how much a company pays in dividends each year based on its stock price.

Decoding Dividends: Yield, Payout, and Rate Made Simple Dividends are one of the perks of owning stocks, but the way they're presented can be a bit tricky to understand. Let’s break it down with an example: Stock Price: ₹500 Dividend Declared for FY24: ₹12 per share Face Value: ₹5 Earnings Per Share (EPS) FY24: ₹80 Dividend Yield: How much you get for what you pay? Think of dividend yield as your "dividend return on investment." It shows the percentage of your stock price that you get back as dividends every year. Dividend Yield = (Dividend Per Share / Stock Price) x 100 = (₹12 / ₹500) x 100 = 2.4% This means for every ₹500 you invest, you get ₹12 in dividends each year – that's a 2.4% return on your investment. Dividend Payout: What percentage of profit is shared? The dividend payout ratio tells you how much of a company’s profit is given to shareholders as dividends. Dividend Payout = (Dividend Per Share / Earnings Per Share) x 100 = (₹12 / ₹80) x 100 = 15% So, the company is sharing 15% of its profits with shareholders and keeping the other 85% for growth. 3. Dividend Rate: not as useful for investors The dividend rate compares the dividend to the face value of the stock, but it doesn’t give you the best picture of your returns. Dividend Rate = (Dividend Per Share / Face Value) x 100 = (₹12 / ₹5) x 100 = 240% While this number is high, it doesn’t reflect the return on your actual investment or how much of the company’s earnings are being paid out. Key Takeaways: Understanding these terms can help you make smarter choices when adding dividend-paying stocks to your portfolio! Follow Chakravarthy V for more such insights.

2 High-Yield Dividend Stocks Set to Soar - https://lnkd.in/gkBJ3EuE "The true investor... will do better if he forgets about the stock market and pays attention to his dividend returns and to the operation results of his companies." – Benjamin GrahamTaking that quote to heart, here are two companies with high dividend yields and improving operations or future growth potential

Decoding Dividends: Yield, Payout, and Rate Dividends are a sweet perk of stock ownership, but understanding the different ways they're discussed can be confusing. Let's break it down using an example: Stock Price: Rs 350 FY24 Dividend Declared: Rs 10.5 Face Value: Rs 10 FY24 Earnings Per Share: Rs 70 1. Dividend Yield: Your Return on Investment (ROI) in Dividends Imagine dividend yield as your dividend "bang for your buck." It shows the percentage of your stock purchase price returned as dividends each year. In our example: Dividend Yield = (Dividend Per Share / Stock Price) x 100 = (10.5 / 350) x 100 = 3% This means for every Rs 350 you invest, you get roughly Rs 3 back in dividends annually. 2. Dividend Payout: How Much Profit Goes to Shareholders Think of the dividend payout ratio as a company's generosity gauge. It reveals what percentage of its profits are paid out as dividends. Dividend Payout = (Dividend Per Share / Earnings Per Share) x 100 = (10.5 / 70) x 100 = 15% Here, the company distributes 15% of its earnings to shareholders, reinvesting the remaining 85% in growth. This balance reflects a company's growth focus – those with limited growth prospects might offer higher payouts. 3. Dividend Rate: Less Useful for Investors The dividend rate, often quoted by companies, isn't as helpful for investors. It simply compares the dividend per share to the face value (a mostly symbolic value) and expresses it as a percentage. Dividend Rate = (Dividend Per Share / Face Value) x 100 = (10.5 / 10) x 100 = 105% While it's 105%, this number doesn't tell us much about the actual return on investment relative to the current stock price or the company's earnings. Remember: When evaluating dividend-paying stocks: -Focus on Dividend Yield: It directly reflects your potential return on investment. -Consider Dividend Payout: It reveals the company's profit-sharing strategy and growth focus. By understanding these terms, you can make informed decisions about dividend-paying stocks in your portfolio. Follow Chakrivardhan Kuppala for insightful posts

Can dividends indicate whether a company's share price is overvalued or undervalued?   Yes, the 𝐃𝐢𝐯𝐢𝐝𝐞𝐧𝐝 𝐃𝐢𝐬𝐜𝐨𝐮𝐧𝐭 𝐌𝐨𝐝𝐞𝐥 (𝐃𝐃𝐌) is a way   DDM is a quantitative method used to predict the price of a company's stock based on the theory that its present value is worth the sum of all its future dividend payments, discounted back to their present value   This model helps calculate the fair value of a stock, regardless of prevailing market conditions, by considering dividend payouts & the market's expected returns   𝐄𝐱𝐚𝐦𝐩𝐥𝐞 𝐭𝐢𝐦𝐞!   Consider, 𝐂𝐨𝐦𝐩𝐚𝐧𝐲 𝐗 - a company paying regular dividends   𝐒𝐜𝐞𝐧𝐚𝐫𝐢𝐨: Company X paid a dividend of $1.80 per share this year and expects to grow its dividend at 5% per year. The required rate of return for the stock (investor's expected return) is 7%   𝐃𝐃𝐌 𝐂𝐚𝐥𝐜𝐮𝐥𝐚𝐭𝐢𝐨𝐧: 1️⃣ 𝐂𝐚𝐥𝐜𝐮𝐥𝐚𝐭𝐞 𝐭𝐡𝐞 𝐝𝐢𝐯𝐢𝐝𝐞𝐧𝐝 𝐟𝐨𝐫 𝐧𝐞𝐱𝐭 𝐲𝐞𝐚𝐫: D1 = D0 × (1+g) D1 = 1.80 × (1+0.05) = 1.89    2️⃣ 𝐃𝐞𝐭𝐞𝐫𝐦𝐢𝐧𝐞 𝐭𝐡𝐞 𝐬𝐭𝐨𝐜𝐤'𝐬 𝐢𝐧𝐭𝐫𝐢𝐧𝐬𝐢𝐜 𝐯𝐚𝐥𝐮𝐞 𝐮𝐬𝐢𝐧𝐠 𝐭𝐡𝐞 𝐆𝐨𝐫𝐝𝐨𝐧 𝐆𝐫𝐨𝐰𝐭𝐡 𝐌𝐨𝐝𝐞𝐥 (𝐆𝐆𝐌):   Stock Value = D1 / (r−g) Stock Value= 1.89 / (0.07−0.05) = 94.50    So, according to the DDM, the 𝐢𝐧𝐭𝐫𝐢𝐧𝐬𝐢𝐜 𝐯𝐚𝐥𝐮𝐞 𝐨𝐟 𝐂𝐨𝐦𝐩𝐚𝐧𝐲 𝐗'𝐬 𝐬𝐭𝐨𝐜𝐤 𝐢𝐬 $𝟗𝟒.𝟓𝟎 𝐩𝐞𝐫 𝐬𝐡𝐚𝐫𝐞   If the current market price is lower than $94.50, the stock is considered undervalued and may be a good buy. If it's higher, the stock might be overvalued #dividends #stock #value LinkedIn

Flash Info #235- Capital Market Preferred dividends refer to the dividends paid to holders of a company's preferred stock. 1. Definition: Preferred dividends are the distributions of a company's profits that are paid out to shareholders of the company's preferred stock before any dividends are paid to the holders of the company's common stock. 2. Preference: Preferred stockholders have a higher claim on the company's earnings and assets compared to common stockholders. This gives them preference in receiving dividends. 3. Dividend Rate: Preferred stocks typically have a stated, fixed dividend rate that is set when the preferred shares are issued. This is unlike common stock dividends, which can fluctuate. 4. Cumulative vs. Non-Cumulative: Preferred dividends can be either cumulative or non-cumulative. Cumulative means if a dividend is missed, it must be paid before common stockholders receive any dividends. Non-cumulative means missed dividends are permanently forgone. 5. Taxation: Preferred dividends are generally taxed as ordinary income to the recipient, unlike qualified dividends from common stock which can receive more favorable tax treatment. 6. Impact on Stock Price: The payment of preferred dividends is seen as a more stable and reliable source of income compared to common stock dividends. This can contribute to higher valuations for preferred shares. 7. Seniority in Bankruptcy: In the event of bankruptcy, preferred stockholders have a higher claim on the company's assets than common stockholders. Preferred dividends provide a predictable income stream for preferred shareholders, who have a senior claim compared to common stockholders. The specific terms of preferred dividends are outlined when the preferred shares are issued. #capitalmarket #investors #ethiopiadiaspora #importer #Exporter #ECMA #founders #ceo #businessowners #banks #moneymarket #commoditymarket #derivatives #valuation

Wouldn't you love to own shares of stock that pay north of 8% in dividends? Read on to learn how. Have you ever heard of preferred stock? Well, it can be a game-changer for portfolios. It offers the benefits of decent income and possibly price appreciation. As @Investopedia.com notes, preferred stock, also known as "preference shares", sits between common shares and bonds in a company's capital structure. That means, preferred stockholders get THEIR dividends paid before common stock dividends. A few types of preferred stock you should know: - Cumulative (Guaranteed): Missed dividend payments? No problem. Holders get paid all arrears owed before common shareholders see a dime. ▶️ Non-Cumulative: Miss a payment? That’s it. No catching up later. ▶️ Participating: Beyond the regular dividend, these shares offer extra payments during extraordinary events. ▶️ Convertible: These can turn into common shares at a predetermined number or event. Investing isn’t just about common stock. Sometimes, preferred shares or bonds offer more compelling opportunities! For the resources I rely on for my preferred stock info, check out my newsletter: 1sthand-research.ck.page #Dividends #OutoftheBox #PreferredStock #InvestmentIdeas #IncomeInvesting

*Fluctuations in Dividend Yields* We thought to give a brief overview of how dividend yield is impacted by stock price movements with this straightforward example. Consider a stock that consistently pays an annual dividend of $4. Initially, the stock is priced at $100, resulting in a dividend yield of 4% (calculated as $4 divided by $100). If the stock price rises to $120, while the dividend stays at $4, the yield reduces to approximately 3.33% ($4 divided by $120). On the other hand, if the stock price drops to $80, the yield would increase to 5% ($4 divided by $80). This example illustrates the inverse relationship between dividend yield and stock prices, assuming the dividend amount remains constant.