Dividends and Stock Analysis
Dividends are very attractive factor that influence the decision about investing in a particular company. So, you should carefully study the connected ratios, since they provide you with information on the performance of the stock.
You can find information on the different dividend ratios on the various online resources. One of the website that provides comprehensive information is Reuters.com. It allows you to enter the stock symbol and get all the relevant information.
Dividend ratios include different indicators. One of them is the Dividend Yield. In order to calculate it you should divide the annual dividend per share by the price of the stock.
Other ratios are the Dividend Yield - 5-Year Ave and the Dividend 5 Year Growth Rate. These ratios provide information on the past performance of the target stock.
Higher yields can be interpreted as showing lower rates of growth. An example of sectors that pay high current yields and at the same time have a slow growth is the real estate and the utilities sector.
Charts are provided to help you make a comparison between current yield and dividend growth so that companies with the right balance are found.
Another ratio you should study is the Dividend Payout Ratio. In order to estimate it you should divide the dividends per share by the earnings per share.
If the result greatly deviates from the number typical for the industry and sector, you should think twice whether this company is a viable investment option.
The calculations of this ratio are distorted by changes in earnings that have occurred because of sales of assets or other events that occur for one time.
Finally, these ratios should represent only one part of your stock analysis. Other considerations should be made but you should not neglect dividend ratios' importance.
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