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When looking for a dividend stock the main thing to look for is the

dividend per share and dividend yield but this is only a small part, we

also have to look at the company’s payout ratio and their dividend

policy.


These are also crucial which is not shown in the KLSE screener so we

will take you through the steps of dissecting it and also how to

calculate and look through these values when doing your homework.



enlightened What Is Dividend Per Share?

Dividend per share also known as DPS which you will usually see in

your KLSE screener app, it is the sum of declared dividends issued by a

company for every ordinary share outstanding. DPS that is growing

over time can be a sign that a company's management believes that

their earnings growth can be sustained thus rewarding shareholders

with more dividend. But it is not always the case as we have to also

look at the company’s payout ratio and EPS (we will cover EPS in the

next “Short & Informational series”). DPS is counted as per below:

 
         = DPS = Annual dividends / purchase price (share price) =


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enlightened What is Dividend Yield?

The dividend yield is the ratio of a company's annual dividend

compared to its share price. The dividend yield is represented as a

percentage. Calculation as below.

 
                     = Dividend Yield = DPS / share price * 100% =

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Annual dividend is the total DPS for 1 year which is divided by the

current share price.



E.g: Company A annual dividend is 40 cents and its share price is RM4

so in total the DY for the year is 10%.

 

 
enlightened What is Payout ratio

Dividend payout ratio shows the percentage of earnings paid out as

dividends to shareholders, typically known as a percentage of the

company's earnings.


The payout ratio can also be said as dividends paid out as a proportion

of their cash flow. Easiest way to calculate dividend payout ratio is to

take the total dividend and divide it with their EPS which you can get

that value in the KLSE screener or you can also divide with net income

which we usually get those values from Morningstar or company’s

annual report.


Most of the time if you see a company’s dividend payout ratio rise to

above 100% means you know they are giving out more cash than they

are receiving, the ideal one would be their DPR while their DY/DPS

, with this you will know that their EPS and their net income has

increased and even when they are giving out more dividend they are

still giving out lesser DPR which they can use their access cash for their

capital expenditure or towards paying off their debts and liabilities.


     = DPR (Dividend Payout Ratio) = Total dividends / EPS or Net Income =



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enlightened What is Dividend policy?

Dividend policy is the policy a company uses to structure its dividend

payout to shareholders basically its like a promise that the company

will at least give that amount of dividend per year. This is another way

to make shareholders to trust the company and to put more money

into the company. Note that their dividend policy can change yearly so

we have to keep doing our homework from time to time.

 


 
enlightened———— Check us out ————enlightened
 
 
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