The Quick Dividend Guide

Dividend Yield: Dividend yield is a financial metric that measures the amount of cash a company pays its shareholders in dividends, relative to its stock price. It is expressed as a percentage and calculated by dividing the annual dividend per share by the stock price per share.

For example, if a company has an annual dividend per share of $2 and its stock price is $50, its dividend yield would be 4%.

Dividend Payout Ratio: The dividend payout ratio is the proportion of a company's earnings that it pays out to shareholders in the form of dividends. It is expressed as a percentage and calculated by dividing the total dividends paid to shareholders by the company's net income.

For example, if a company has net income of $100 million and pays out $20 million in dividends, its dividend payout ratio would be 20%.

Cash Dividend Payout Ratio: The cash dividend payout ratio is similar to the dividend payout ratio, but only considers cash dividends. It is calculated by dividing the total cash dividends paid to shareholders by the company's net income.

Total Return: Total return is the total amount of money that an investment has generated over a specified period of time, including both capital gains and dividends. It is expressed as a percentage and calculated by taking the total return over a period of time and dividing it by the initial investment.

Earnings per Share (EPS): Earnings per share (EPS) is a financial metric that measures the amount of net income a company generates for each outstanding share of its stock. It is calculated by dividing the company's net income by the number of outstanding shares.

Price to Earnings (P/E) Ratio: The price to earnings (P/E) ratio is a financial metric that measures the relative price of a stock to its earnings. It is calculated by dividing the stock price per share by the earnings per share.

Dividend Yield History: The dividend yield history of a company is a record of its dividend yields over time. This information can be used to track the company's dividend performance and to make informed investment decisions.

Dividend Taxation: Dividends are taxed as ordinary income and are subject to federal income tax. The tax rate depends on the taxpayer's income bracket. In some cases, dividends may also be subject to state and local taxes.

Dividend Investment Strategies:

1.     Dividend Growth Investing: This strategy involves investing in companies with a history of increasing their dividends over time. This allows investors to receive growing income streams and benefit from the compound growth of their dividends.

2.     Dividend Income Investing: This strategy involves investing in high-yielding dividend stocks in order to generate a regular income stream. This strategy is popular among retirees who rely on their investments to support their living expenses.

3.     Dividend Capture: This strategy involves buying stocks shortly before their ex-dividend date and selling them shortly after the date. This allows investors to receive the dividend and benefit from the short-term capital appreciation that often occurs when a stock goes ex-dividend.

4.     Dividend Reinvestment: This strategy involves reinvesting the dividends received from an investment back into the same investment. This allows investors to benefit from the compound growth of their dividends over time.

In conclusion, dividend yield, dividend payout ratio, cash dividend payout ratio, total return, earnings per share, P/E ratio, and dividend yield history are important financial metrics for evaluating and comparing stocks. Understanding how dividends are taxed and the different dividend investment strategies can help investors make well informed decisions.