9. Additional numerical measures to evaluate stock prices - Cashdividends, dividends per share, dividend payout ratio, and dividendyield Although a company's earnings per share (EPS) and price/sales ratio (P/S ratio) are the most important measures to use in evaloating a stock with fundamental analysis, several other numerical measures are also used to evaluate stock performance: Cash Dividends Most stocks pay didends to shareholders. Cash dividends are distributions made in cash to holders of the stock, Cash dividends are the current Income that you receive while you own shares in the company. For most stocks, the Prm's board of directors usually declares a dividend on a quarterly basis. Dividends are typically paid out of a company's current earnings, although during unprofitable times, the dividends might be pald from a company's cash reserves Occasionally a company will borrow to pay the dividends to maintain its reputation for consistently paying dividends, in which case later profits can be used to repay any funds borrowed for the purpose of paying dividends. Dividends per Share The dividends per share measure gives you the amount of dividends paid per share of common stock on an annual basis. For example, suppore company A elects to pay a total cash dividend of $8,000 for the year to common stockholders. Also suppose that the company has issued a total of 40,000 shares of outstanding common stock. In this case, the annual cash dividends per share for this company would be $ per share Dividend Payout Ratio The dividend payout ratio is the dividends per share divided by the earnings per share (EPS). This measure helps you judge the likelihood of future cash dividends. The dividend payout ratio is also equal to a company's total annual cash dividends divided by the company's total earnings for the year For example, suppose company Beamed 556,000 after paying preferred stockholders, Dald out a total cash dividend of $16,000 for the year, and retained the remaining $40,000 to facilitate growth of the company. In this case, the dividend payout ratio (as a decimal) would be trounded to the nearest percent), Newer companies wally retain most, if not all of their profits to facilitate growth. Therefore, if you are interested mainly in capital gains through For example, suppose company A elects to pay a total cash dividend of $8,000 for the year to common stockholders. Also suppose that the company has issued a total of 40,000 shares of outstanding common stock. In this case, the annual cash dividends per share for this company would be $ per share. Dividend Payout Ratio The dividend payout ratio is the dividends per share divided by the earnings per share (EPS). This measure helps you judge the likelihood of future cash dividends. The dividend payout ratio is also equal to a company's total annual cash dividends divided by the company's total earnings for the year. For example, suppose company B earned $56,000 after paying preferred stockholders, paid out a total cash dividend of $16,000 for the year, and retained the remaining $40,000 to facilitate growth of the company. In this case, the dividend payout ratio (as a decimal) would be (rounded to the nearest 100 percent). th Newer companies usually retain most, if not all of their profits to facilitate growth. Therefore, If you are interested mainly in capital gains through growth, you should seek a company with a dividend payout ratio. The lower the payout ratio, the Mikely the company is to grow, resulting in later capital gains for Investors Dividend Yield The dividend yield is the cash dividend paid to an investor, expressed as a percentage of the current market price of the security. For example, suppose company C pays an annual dividend of $0.80 per share of common stock. The current market price of the stock is $12.50. Therefore, the dividend yield for this stock is Growth and speculative companies typically pay little or no cash dividends, which means that they will have a limited dividend yield. Companies with low dividend yields are attractive to investors seeking investors seeking By contrast, companies with high dividend yields are attractive to
