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Dividend yield is the ratio of dividend per share to price per share, or total annual dividend payments to market capitalization. Learn how dividend yield is used to evaluate investments, compare different types of stocks, and compute yield on cost and yield to call.
Learn how to value a stock based on its dividend payments and growth rate using the dividend discount model (DDM) formula. The DDM formula is derived from the present value of a perpetuity and the cost of equity capital.
Learn how to calculate and interpret the dividend payout ratio, which is the fraction of net income a firm pays to its stockholders in dividends. See the historical data and impact of buybacks on this ratio for S&P 500 companies.
To calculate a stock’s dividend yield, take the company’s total expected payout over the course of a year and divide that by the current stock price. The mathematical formula is as follows:
Dividend cover is the ratio of company's earnings over the dividend paid to shareholders. The formula is the inverse of the dividend payout ratio. Learn how to calculate and interpret dividend cover and its implications for dividend sustainability.
Consider a stock paying no dividends. Now construct any derivative that has a fixed maturation time T {\displaystyle T} in the future, and at maturation, it has payoff K ( S T ) {\displaystyle K(S_{T})} that depends on the values taken by the stock at that moment (such as European call or put options).
Division is one of the four basic operations of arithmetic, which involves calculating the number of times one number is contained within another. Learn about different types, properties, and notations of division, as well as its applications in algebra and other fields.
Earnings growth is the annual compound annual growth rate (CAGR) of earnings from investments. Learn how to calculate earnings growth, its relation to dividend growth, P/E ratio, and historical growth rates of S&P 500 Index.
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