If you are investing in stock market mainly to get dividends, you will be interested in the dividend per share.
That is one of the key financial ratio you can check before you buy the stock.
In fact, you must pay attention to the different dividend policy before you decide on the best company.
You must not just take the dividend per share for this year. You must use the dividend ratio for the past five years for analysis purpose.
One important dividend ratio is the dividend yield. If the company gives out dividend twice in year, you add the dividend per sharefor the whole year, and divides by the share price.
That is the dividend yield. The dividend yield for you is different from others. You buy the share at different price than the other investors.
If you receive a total of $5 dividend, and you bought the share at $100 per share, the dividend yield is 5%.
Another ratio is the dividend payout ratio.
You know that a company cannot give out all the profits. It must retain some profits for operating purposes. That is how the dividend payout ratio helps you to see the percentage of the earnings given out to investor.
If the earning per share is $25, and the dividend is $5,that means the dividend payout ratio is 20%.
A growing company has more uses for retained earnings. It needs the money to fund the different projects. A defensive stock usually does not have much room for expansion. It is hard for the utility company to think about expansion. The dividend payout ratio is usually higher than other companies.
It does not take long to check the dividend per share. You can see the information from the annual report. Many analyst research provide the dividend per share information as well.
It is important to use the dividend per share to get the different dividend ratio. You can choose the best company to invest for the sake of income security.
It is good to use at least the past five years record for analysis. You can see how the dividends are affected by the economy.
Scheng1 is a passionate blogger from Singapore. Rich in every sense reveals my deep desire in enjoying life, and be rich in every possible ways.