Ways to Calculate Dividend Yield

The inherent value of a stock and its future potential can only be determined by studying the fundamentals of the holding company. It’s therefore essential that every stock investor be well versed in the art of security analysis. Among the many financial parameters that come under the scanner while studying a stock’s performance, one of the most important is ‘Dividend Yield’. Ergo, it’s essential that a beginner stock investor knows how to calculate dividend yield. That’s exactly what is discussed in this Buzzle article, which also offers a ready-to-use online dividend yield calculator, which you can use right away. Those among you, who are clueless about what dividend yield is and its calculation procedure are advised to keep reading ahead.

Dividend Yield Calculator
Enter Annual Dividend Value Per Share in USD
Enter Current Trading Stock Price in USD

Dividend Yield =

What is Dividend Yield?
Many public listed companies offer a share of their annual profits in to their shareholders. The share of profits received is known as a ‘Dividend’. Depending on the quarterly profits of every company, its dividend value varies. Also, subject to company performance and market whims, its stock price rises and falls on the stock market. A dividend yield value correlates the company’s annual dividend paid per share with its current stock price. In fact, when you divide the annual dividend per share, by its current stock price, what you are left with, is the dividend yield. Here is the formula used for dividend yield calculation.

Dividend Yield = (Annual Dividend Value Per Share) / (Current Stock Price Per Share)

Dividend yield is a ratio is often expressed in percentage. The higher the value of the annual dividend, more profitable will be the acquisition of the stock.

Dividend Yield Calculation
From the company financial records offered online, you can compute the value of dividend yield, if you know the current stock trading price and the annual dividend value per share. Let me illustrate the calculation, through an example. This ratio offers you a direct measurement of the return on investment, which you might expect through purchasing of the stock.

Consider that a stock is trading at a value of $25 and it yields an annual dividend of $4 per share, then what would its dividend yield be? Using the calculator presented above, the answer can be easily computed. In this case the result would be as follows:

Dividend Yield = ($4/$25) = 0.16

This value means that 16% of your money invested in buying the share would be eventually recovered through dividends. If you find an actual stock which can provide a 16% dividend yield, I would recommend that you buy it. However, the yield rarely tends to be this high and is usually less than 10%. Using the calculator provided above, you can easily computer the dividend yield value for any stock. Visit any one of the online services which provide live stock data. My suggestion would be that you use Google Finance site, which offers complete information about any stock trading on NYSE, NASDAQ and AMEX.

As you might have already realized, computing the dividend yield value is a simple task, once you know the annual dividend share value and the price at which the stock is currently trading. Companies that have been in business for long and especially blue chip companies like Google or Microsoft will always have a greater dividend yield percentage, compared to others.

Stocks with rich dividend yields are investments that can provide you with a high return on investment in the future. Consider all the factors which determine the value of a stock like earnings per share, company’s P/E ratio, debt to equity ratio, past revenue records and other factors in totality, before deciding to make a share purchase.

Finding Best Stock Investing Strategies

download-31Every business organization needs capital to function and earn profits. This capital is collected by the organization by issuing shares or stocks that can be purchased by individuals. When you purchase stocks of a company, you get a stock certificate which states the number of shares acquired, and implies that you have a partial ownership of the company. This means that you will earn a share of the company’s profits, in proportion to the number of shares you invested in. For example, if a company has 100 shares and you buy 5 of them, you have 5% ownership of the company. A stock market is a place where you can invest in, and trade for, stocks of different business firms at a certain price. An example is the New York Stock Exchange (NYSE).

When it comes to the best strategies to invest in stocks, there is no single strategy that is universally recommended. You can choose a strategy that suits you, based on how much amount you wish to invest, the risk you are willing to take, and how the market behaves. You should have a clear picture of how the stock market works, in order to invest in stocks successfully.

Techniques for Stock Analysis

There are basically two analytical techniques used by stock investors for stock picking, or choosing the stock to invest in. Let us discuss each one of them.

Fundamental Analysis

This method of analysis is used for analyzing the financial condition of the company, its market share, competition etc. There are two approaches for conducting fundamental analysis: top down approach and bottom up approach. Using the top down analysis method involves beginning with the study of global and international markets, and finally zeroing in on the best business firm in the local area. In contrast to this, the bottom up method of analysis involves studying about specific business organizations, irrespective of the region.

Technical Analysis

This method of analysis is about forecasting the stock prices of business firms by taking into consideration the past market data. However, its major drawback is that stock prices are unpredictable and do not follow any distinct patterns.

Strategies for Stock Investing

The stock market can witness both upward and downward market trends, due to which it is always advisable to adopt certain strategies to avoid financial losses. Let us discuss few of the best stock investing strategies that you can keep in mind while investing in stocks.

  • Remember the three golden words: selection, timing and price. Investing in the stocks of the right company at the right time, is fundamental for success.
  • If you are a beginner to stock market investing, you should not opt for penny stocks, or stocks of small public companies.
  • Set individual goals and decide what you want out of your investment. This will help you zero in on the perfect investment plan that will suit your needs. Remember that the ultimate objective of investing in stocks, is to make your money grow over time.
  • Before investing in stocks of a company, check on the risk factors involved to make sure it is safe and acceptable.
  • Don’t aim at getting rich overnight, instead, plan for long term returns.
  • Don’t rely merely on luck for success. Do your share of homework before investing, make sure the company has a stable management, consistent profitability and long-term growth potential.
  • To reduce the risk factor, it is advisable to invest in a number of growing companies, and keep a tab on their stock prices for an opportunity to buy more shares when there is a dip in stock prices. This will also add diversity to your investment portfolio.
  • Do not sell stocks except when it is favorable to do so. You can sell the stocks when either the stocks you have are not fetching you any profits, or when the company is close to the end of its growth phase.
  • Do not be impulsive in selling your stocks, merely because of the current market trends, or simply to achieve short-term gains. Do not allow short-term market fluctuations disturb you.

Investing in the stock market successfully is an art that you can master if you tread with care, and are persevering enough. Just incorporating some of the best strategies for stock investing will help you reap appreciable profits. Here’s wishing you luck!

Ways to Start Your Personal Concierge Business

download-30Working individuals always find it difficult to maintain a balance between their personal and personal lives. According to some studies, it has been found that most of the employees take care of their personal responsibilities while at work, which imbalances their performance at work.

Hiring a concierge such as personal concierge is amongst the best solutions for those busy individuals as the person offering this service will take the responsibility of doing all of your daily routine tasks. Before going further, you need to know what a personal concierge can do for you? For this, first of all know its definition.

A personal concierge is a person who provides personal errand services to individuals and businesses. You no longer need to worry about completing your household jobs like house cleaning, grocery shopping, payment of utility bills, dry cleaning of clothes, dropping your letters to the post office and others. In the present times, starting a concierge service business is amongst the best options as it requires a small investment. You can either start a self-employed business where you alone have to handle all the requests of your clients or you can build a team of professionals who are capable of doing a job of a concierge.

Below are some important points listed that can be useful to you start a concierge business:

The first and most important thing that needs to be taken into consideration is to find out the legalities of this business like is there any requirement of a license to run this business, an insurance of your business or any other thing. You need to fulfill all those conditions in order to start your concierge service business.

The second thing that you need is a perfect plan to make your business a success. Planning is important for every business, whether it is small business or a big one. You need to have a plan like what would you do to maximize your profits.

The next thing to take care is to do proper research in the market to study the industry and search for your competitors. Doing research will give you an idea about the market so that you can start offering a unique service that makes your business different from others.

Promotion of a business is much important than any other thing as it makes people aware about your business. You can promote your business by advertising it through classified ads in newspapers and magazines.

You need to have excellent communication skills if you are starting a personal concierge business alone or if you are starting your business with a team of professionals, then each and every single person in your team needs to possess excellent communication skills.

 

Ways to Pick Stocks That Pay Dividends

download-29What adds value to an equity share, in addition to the increase in its price, is the dividend payout. Steady stocks with a history of regular dividend payments are attractive investments for retirees and those seeking a steady source of income. A smartly chosen portfolio of dividend-paying stocks makes for a great income source in the long term. Studies have revealed a positive correlation between consistently high dividend yield and the future growth potential of stocks. Taxation is levied on dividends, according to standard or reduced rates.

While not all high growth stocks may be paying dividends (Berkshire Hathaway being a case in point), the ones that do, make for ideal investments. Investors looking for a long term (10 year or more) investment horizon, should opt for these stocks. These investments prove to be productive assets during bear markets, ensuring a steady income stream.

A thorough analysis of the stock’s current relevant fundamentals, its history, the future potential of the business in its market domain, and the ability of its management are some of the factors that need to be taken into consideration. In what follows, we provide a succinct guide, that will identify the exact factors to consider and help in developing your personal investment process.

Choosing Dividend-Paying Stocks

As much as 80% of the S&P 500 stocks pay dividends, providing a substantial pool to choose from. We have extracted the best stock-picking advice from the world’s leading investment professionals to provide pointers that will help you choose the right equity options.

Long History of Consistent Payments

Companies with known dividend-paying history spanning decades, with a steadily increasing yield percentage, make for good investments. An example is Procter & Gamble (NYSE: PG), that is backed up by two solid decades of growing dividend payout record. Another example is PepsiCo Inc. (NYSE: PEP), with two decades of consistently-rising dividend payment history. This doesn’t mean that stocks that have only recently started paying out dividends should be ignored, but a company that has a proven history makes for a safer bet. The ability to pay out dividends to shareholders on a regular basis, indicates the sound financial health of a company.

Good Dividend Yield

Yield percentage is obtained by dividing the annual dividend yield offered per share, by the price per share. In short, it quantifies the degree of returns per dollar invested in a share. For example, if the annual dividend yield paid out by a company is USD 1 and its price happens to be USD 20, then the yield percentage is 5%. Most companies provide 2% to 5% yield, making for decent investments. A value higher than 5% does not necessarily indicate a good stock, as that amount of payout may prove to be unsustainable in the long run and the dividend yield may in fact decrease in the future. Look for businesses that have sustained or gradually increased their yield over the years.

A Decent Payout Ratio (Preferably Less Than 60%)

The payout ratio defines the quantum of earnings paid out as dividends by a company. It is obtained by dividing the dividends per share, by the earnings per share of the company. Generally, if the payout ratio is too high (above 60%), it may turn out to be unsustainable in the future. A payout ratio that’s less than 60%, indicates that the company may be using the remaining shares of its earnings for share buybacks or reinvestment in its own business activities; this being a good sign.

High Earnings Per Share (EPS)

A high earnings per share value, that has consistently grown over a decade, indicates that the business has been steadily growing in profitability. Ergo, a history of progressively rising EPS marks out a growing business and makes for a good investment.

Strong Free Cash Flow

The ability of any public-listed business to expand its operations, pay out dividends, engage in share buybacks, and acquire new assets depends upon the availability of ready cash. This free cash flow is the amount of money at a company’s disposal. It is calculated by subtracting capital expenditures from the operation cash flow. Companies with strong positive cash flows are most well-positioned to pay out dividends in the future and therefore, make for excellent choices.

Ability to Buy Back Stock

Another feature that you should look out for is a history of share buybacks by the company, from shareholders. When shares are bought back, the number of shares available in the market reduces, automatically increasing the earnings per share, besides benefiting the investors from whom the shares are bought. Moreover, it increases the value of existing stock for investors. Therefore, it is beneficial to go for a company that has opted for share buybacks in the past, as it is more likely to do the same, in the future.

Predictable Earnings and Steady Demand

Stocks from sectors like utilities, that can provide predictable earnings over the years, with high demand for their products in domestic, as well as international markets, make for ideal investment targets for the long term. The high demand guarantees consistent sales, which in turn indicates a positive cash flow, leading to dividend-paying ability.

High Cash Balance

High retained cash balance ensures that the company has enough balance to fund future dividend payouts. High liquidity is a strong asset, that boosts the stock’s value.

Low Debt

Besides all the above factors, the fact that a company owes less and has low expenses in terms of interest payments, makes it buoyant enough to pursue new projects and take risks, which is good for the growth of the stock, in the long term.

Strong Fundamentals and Stock Price Stability

Very high volatility in stock price indicates erratic financial performance. Ergo, price stability over the years is an important factor to consider, when evaluating a stock. Other than all these features, look for companies with a capable management and strong financial fundamentals, indicated by high quarter-on-quarter revenues, high return on investment (ROI), low P/E, and low P/B ratio.

Through dividend reinvestment programs (DRIPs), a company offers you the option of buying more shares through your dividends, instead of getting paid in cash. This is an added advantage of opting for such stocks.

Always think long term, is a dictum that has often worked in favor of most successful investors and you need not be an exception. Thinking of a stock as buying a quantum of ownership in a business, helps in developing the appetite to stay invested for the long term. Base your decisions on financial fundamentals, instead of the latest speculations. To sum up, look for positive cash flow, predictable earnings, low debt, high cash balance, growth potential, and history, when choosing income-generating dividend stocks.