Building Wealth With Dividend Growth Stocks by Derrick C. Thomas - HTML preview

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– Key Metrics in
Dividend Evaluation –

Dividend Yield: is the annualized dividend, represented as a percentage of the stock price. For instance, if a company pays $1 in annualized dividends and the stock price costs $20 per share, then the dividend yield would be 5%.

Payout Ratio: is the dividend as a percentage of a company's earnings. If a company earns $1 per share in net income and pays a $0.50–per–share dividend, then the payout is 50%. The lower the payout ratio, the more sustainable a dividend should be.

Total Return: is the increase in stock price (known as capital gains) plus dividends paid. For example, if you pay $10 for a stock that increases in value by $1 and pays a $0.50 dividend, then that's $1.50 you've gained is equivalent to a 15% total return.

EPS: means earnings per share. The best dividend stocks are from companies that have shown the ability to regularly increase earnings per share over time giving them the ability to raise their dividend.

P/E Ratio: the P/E ratio or price–toearnings ratio is calculated by dividing a company's share price by its earnings per share.