Author Topic: How to calculate dividends  (Read 3236 times)

flower

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How to calculate dividends
« on: March 01, 2014, 09:36:08 PM »
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« Last Edit: March 04, 2014, 12:42:12 AM by flower »

marty998

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Re: How to calculate dividends
« Reply #1 on: March 01, 2014, 09:43:00 PM »
That dividend yield is historical. Assuming an equal payment per quarter it is $1 per share per quarter.

Yield is just (dividend for the year) / (current share price). Obviously the yield goes down as the share price goes up, but share prices rise in part due to expectations of higher earnings and dividends.

Markets around the world are slightly different. The Australian market and investors place a premium on high dividend payouts, and investors like stocks paying 5% yields. US market is different where investors will tolerate a lower yield in search of higher capital growth.

arebelspy

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Re: How to calculate dividends
« Reply #2 on: March 01, 2014, 09:45:23 PM »
Markets around the world are slightly different. The Australian market and investors place a premium on high dividend payouts, and investors like stocks paying 5% yields. US market is different where investors will tolerate a lower yield in search of higher capital growth.

Which is the exact opposite of our real estate markets!  There you will take lower yield (cash flow) in search of higher capital growth (appreciation), whereas over here we (tend to) look for cash flow over appreciation (or at least first).

Funny, never noticed that flip between dividends over there and here versus rental cash flow over there and here.
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wtjbatman

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Re: How to calculate dividends
« Reply #3 on: March 01, 2014, 10:43:08 PM »
I get dividends, but I don't know how they were calculated.

If I own 1000 shares of:

Chevron Corporation (CVX) - 115.33 (Share price)
Div & Yield:   4.00 (3.50%)


For the quarterly payment, how to calculate.

marty998 had it right when he said that "Yield is just (dividend for the year) / (current share price)", but he kind of went off on a little bit of a tangent. I do dividend growth investing, so I'll give it a shot explaining it.

Share price doesn't affect the actual dividend amount, just the calculated yield. So when you ask how to calculate the quarterly payments on your stock, it's actually simple. Ignore share price. You own 1000 shares of CVX which pays out a dividend of $4.00 annually. Obviously, a quarterly payment means you divide the annual yield ($4.00) by 4, which gets you a simple $1 a quarter dividend payment. 1000 shares times $1 equals a dividend payment of $1000 every three months.

By the way, not sure if this is just hypothetical, but I love CVX as a div stock. I'm long in my IRA.

flower

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Re: How to calculate dividends
« Reply #4 on: March 02, 2014, 08:51:47 AM »
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« Last Edit: March 04, 2014, 12:42:41 AM by flower »

wtjbatman

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Re: How to calculate dividends
« Reply #5 on: March 02, 2014, 11:03:35 PM »
Sounds like, oh, Bank of America (BAC)? They seem to be having more trouble recovering from the great recession than banks like Wells Fargo (WFC) or JPMorgan (JPM), they have some ongoing legal issues, and their current 1 penny dividend is largely symbolic... but share prices have been climbing fairly steadily (if slowly) since the beginning of 2012, and eventually they will be given permission by the feds to reinstate their dividend. If I had room in my portfolio I would definitely pick up some BAC now. Eventually it will go much higher and institute a solid dividend. For now though, I'm looking at WFC or HSBC for my bank stock needs.

KingCoin

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Re: How to calculate dividends
« Reply #6 on: March 03, 2014, 01:21:42 PM »
Thanks for your comments.  I'm actually very heavily into too-big-to-fail bank stocks that many feel still have a lot of long term up side so I'm staying in these long term.  Dividend is small for now, but historically, banks pay a nice dividend so I was wondering how to calculate it.  Eventually bank stocks will trade steadily sideways and I expect that is when dividends will go higher - preparing for that, but I think it is more than a few years away.

Just make sure you're well diversified. Financial stocks dropped 80% in the financial crisis. It's fun to postulate as to what might happen to a given sector, but you know far less about banks than other people investing in these stocks, so I wouldn't risk your financial future on what is essentially a gamble. Diversification is the only free lunch in investing.  Don't give it away.