Dividend Ratios

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Key Components
Dividend Yield Ratio
Compares a company’s annual dividend per share to its stock price per share.
Dividend Payout Ratio
Measures the percentage of earnings paid out as dividends.
Dividend Coverage Ratio
Compares earnings to dividend payments, assessing the ability to cover dividends with earnings.
Dividend Growth Rate
Measures the percentage increase in dividends over time, indicating the growth rate of dividend payments.
Dividend Stability Ratio
Evaluates the consistency of dividend payments over time.
Dividend per Share (DPS)
Represents the total dividend payments made to shareholders divided by the number of shares outstanding.
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Dividend RatioDescriptionWhen to UseExampleFormula
Dividend Yield RatioCompares a company’s annual dividend per share to its stock price per share.Assess the income generated from dividend payments.A dividend yield of 3% means an annual dividend of $3 for every $100 invested.Dividend Yield = Annual Dividend per Share / Stock Price per Share
Dividend Payout RatioMeasures the percentage of earnings paid out as dividends.Assess the sustainability of dividend payments.A dividend payout ratio of 40% indicates 40% of earnings are paid as dividends.Dividend Payout Ratio = Dividends per Share / Earnings Per Share
Dividend Coverage RatioCompares earnings to dividend payments, assessing the ability to cover dividends with earnings.Evaluate the ability to sustain dividend payments.A dividend coverage ratio of 1.2 suggests earnings cover dividends 1.2 times.Dividend Coverage Ratio = Earnings Per Share / Dividends per Share
Dividend Growth RateMeasures the percentage increase in dividends over time, indicating the growth rate of dividend payments.Assess the historical trend of dividend growth.A dividend growth rate of 8% means dividends have grown by 8% annually.Dividend Growth Rate = (Dividends in Current Period – Dividends in Previous Period) / Dividends in Previous Period
Dividend Stability RatioEvaluates the consistency of dividend payments over time.Assess the reliability of dividend payments.A dividend stability ratio of 0.9 indicates 90% consistency in dividend payments.Dividend Stability Ratio = Number of Years with Dividends / Total Number of Years
Dividend per Share (DPS)Represents the total dividend payments made to shareholders divided by the number of shares outstanding.Assess the total dividend amount allocated per share.A DPS of $2 indicates $2 of dividend per share.Dividend per Share = Total Dividends Paid / Number of Shares Outstanding
Dividend to Earnings (D/E) RatioCompares total dividends paid to total earnings, assessing the proportion of earnings allocated to dividends.Evaluate the allocation of earnings to dividends.A D/E ratio of 0.5 suggests 50% of earnings are allocated to dividends.Dividend to Earnings Ratio = Total Dividends Paid / Total Earnings
Dividend Yield to Growth (DYGR) RatioCombines the dividend yield ratio with the dividend growth rate, assessing the total return on dividends.Assess the combined impact of yield and growth on returns.A DYGR ratio of 5% suggests a 5% total return on dividends considering yield and growth.DYGR Ratio = Dividend Yield + Dividend Growth Rate
Dividend Payout Growth Rate (DPGR) RatioMeasures the percentage increase in the dividend payout ratio over time, indicating the growth in dividend payments as a percentage of earnings.Assess the trend of increasing dividend payments relative to earnings.A DPGR ratio of 10% means the dividend payout ratio has grown by 10% annually.DPGR Ratio = (Dividend Payout Ratio in Current Period – Dividend Payout Ratio in Previous Period) / Dividend Payout Ratio in Previous Period
Dividend Per Share Growth Rate (DPSGR) RatioMeasures the percentage increase in dividend per share over time, indicating the growth rate of dividend per share.Assess the trend of increasing dividend payments on a per-share basis.A DPSGR ratio of 6% means dividends per share have grown by 6% annually.DPSGR Ratio = (Dividend per Share in Current Period – Dividend per Share in Previous Period) / Dividend per Share in Previous Period
Dividend to Price (D/P) RatioCompares annual dividends per share to the stock’s price per share, assessing the return on investment from dividends.Assess the relative return on investment from dividends.A D/P ratio of 0.05 suggests a 5% return on investment from dividends.D/P Ratio = Dividend per Share / Stock Price per Share
Dividend Yield on Cost (DYOC) RatioCompares the current dividend yield to the original cost of the investment, assessing the yield on the initial investment.Evaluate the yield on the original investment.A DYOC ratio of 6% suggests a 6% yield on the initial investment cost.DYOC Ratio = Dividend Yield / Initial Investment Cost
Dividend Earnings Ratio (DER)Compares dividends per share to earnings per share, indicating the proportion of earnings allocated to dividends.Evaluate the allocation of earnings to dividends on a per-share basis.A DER ratio of 0.4 means 40% of earnings are allocated to dividends on a per-share basis.DER Ratio = Dividend per Share / Earnings Per Share
Dividend Price Index (DPI) RatioCompares the current dividend yield to the average yield over a specified period, evaluating the relative yield.Assess the current dividend yield relative to historical averages.A DPI ratio of 1.2 suggests the current yield is 20% higher than the historical average.DPI Ratio = Current Dividend Yield / Average Dividend Yield
Dividend Stability Growth Rate (DSGR) RatioMeasures the percentage increase in the dividend stability ratio over time, indicating the trend in dividend payment consistency.Assess the trend of increasing consistency in dividend payments.A DSGR ratio of 0.08 means the dividend stability ratio has increased by 8% annually.DSGR Ratio = (Dividend Stability Ratio in Current Period – Dividend Stability Ratio in Previous Period) / Dividend Stability Ratio in Previous Period
Dividend Retention Ratio (DRR)Measures the percentage of earnings retained by the company instead of paid out as dividends.Assess the proportion of earnings reinvested in the business.A DRR ratio of 0.6 indicates 60% of earnings are retained for reinvestment.DRR Ratio = 1 – Dividend Payout Ratio
Dividend to Cash Flow (D/CF) RatioCompares total dividends paid to total cash flow from operations, assessing the ability to sustain dividend payments from cash flow.Evaluate the sustainability of dividends based on cash flow.A D/CF ratio of 0.9 suggests 90% of dividends are covered by cash flow.D/CF Ratio = Total Dividends Paid / Cash Flow from Operations
Dividend Per Share to Earnings Per Share (DPS/EPS) RatioCompares dividend per share to earnings per share, indicating the proportion of earnings allocated to dividends on a per-share basis.Assess the allocation of earnings to dividends on a per-share basis.A DPS/EPS ratio of 0.5 means 50% of earnings are allocated to dividends on a per-share basis.DPS/EPS Ratio = Dividend per Share / Earnings Per Share
Dividend Growth Stability Ratio (DGSR) RatioMeasures the consistency of dividend growth over time, indicating the stability of dividend growth rates.Assess the consistency of dividend growth.A DGSR ratio of 0.9 indicates a 90% consistency in dividend growth rates.DGSR Ratio = Number of Years with Dividend Growth / Total Number of Years
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The circle of competence describes a person’s natural competence in an area that matches their skills and abilities. Beyond this imaginary circle are skills and abilities that a person is naturally less competent at. The concept was popularised by Warren Buffett, who argued that investors should only invest in companies they know and understand. However, the circle of competence applies to any topic and indeed any individual.

What is a Moat

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Economic or market moats represent the long-term business defensibility. Or how long a business can retain its competitive advantage in the marketplace over the years. Warren Buffet who popularized the term “moat” referred to it as a share of mind, opposite to market share, as such it is the characteristic that all valuable brands have.

Buffet Indicator

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The Buffet Indicator is a measure of the total value of all publicly-traded stocks in a country divided by that country’s GDP. It’s a measure and ratio to evaluate whether a market is undervalued or overvalued. It’s one of Warren Buffet’s favorite measures as a warning that financial markets might be overvalued and riskier.

Venture Capital

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Venture capital is a form of investing skewed toward high-risk bets, that are likely to fail. Therefore venture capitalists look for higher returns. Indeed, venture capital is based on the power law, or the law for which a small number of bets will pay off big time for the larger numbers of low-return or investments that will go to zero. That is the whole premise of venture capital.

Foreign Direct Investment

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Foreign direct investment occurs when an individual or business purchases an interest of 10% or more in a company that operates in a different country. According to the International Monetary Fund (IMF), this percentage implies that the investor can influence or participate in the management of an enterprise. When the interest is less than 10%, on the other hand, the IMF simply defines it as a security that is part of a stock portfolio. Foreign direct investment (FDI), therefore, involves the purchase of an interest in a company by an entity that is located in another country. 

Micro-Investing

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Meme Investing

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Retail Investing

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Accredited Investor

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Accredited investors are individuals or entities deemed sophisticated enough to purchase securities that are not bound by the laws that protect normal investors. These may encompass venture capital, angel investments, private equity funds, hedge funds, real estate investment funds, and specialty investment funds such as those related to cryptocurrency. Accredited investors, therefore, are individuals or entities permitted to invest in securities that are complex, opaque, loosely regulated, or otherwise unregistered with a financial authority.

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Balance Sheet

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Income Statement

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Cash Flow Statement

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Capital Structure

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Capital Expenditure

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Financial Statements

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Financial Modeling

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Financial Ratio

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WACC

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Financial Option

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Frequently Asked Questions

What are the key components of Dividend Ratios?
The key components of Dividend Ratios include Dividend Yield Ratio, Dividend Payout Ratio, Dividend Coverage Ratio, Dividend Growth Rate, Dividend Stability Ratio. Dividend Yield Ratio: Compares a company’s annual dividend per share to its stock price per share. Dividend Payout Ratio: Measures the percentage of earnings paid out as dividends.

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