The concept of Dividend Cover ( D / EPS ) & Dividend Yield ( D / Share Price )

1) Dividend Yield   =    Total dividends in a year per share  /    Price of one share currently or bought in

This is a good figure to work out how much dividends you are earning for the amount you want to invest or have invested.

ex          CapLand share price is $2.87      the dividends is $90 per 1000 lot share annually

              Yield =   $90   /   $2870     =    3.135%   , already better than the bank.

*For illustrative purpose only. This is not meant to be a recommendation and the author will not be held responsible for any losses incurred in those buying CapLand after reading this*

This figure is commonly already calculated as one of the ratios and is easily available. Look out for Yield % as one of the criteria to decide which is a good stock to buy for dividends. Some counters dont offer much dividends and are for capital appreciation only. Some counters are more for dividends, their share prices are not moving much, fluctuates around a small band. Some are a mix, they have decent dividends and have a wider band that allows for capital appreciation. You have to decided on your own list of criteria to narrow your basket of stock counters to follow. Also since yield depends on the share price, so looking out for a quality company with high enough dividends and wait for its price to be lowered before going in.



2) Dividend Cover   =   Dividend per share   /    Earnings Per Share (EPS)

same example of CapLand
           
            dividend is $90 per 1000 share                             Earnings per share $$0.25
    dividend per share = $90 / 1000  = $0.09

            Dividend Cover   =   $0.09  /   $0.25     =   36%

*For illustrative purpose only. This is not meant to be a recommendation and the author will not be held responsible for any losses incurred in those buying CapLand after reading this*

This is an indicator to see how much of the earnings are being paid out as dividends. Too high, 100% meant the company's dividends are not sustainable. Whilst REITs and Trusts do pay out a high portion, 80% and above, you have to judge whether the company is overpaying dividends. If the dividend policy is unsustainable, the future dividends might be cut in the future. You have to look at this figure, on top of other criteria ex yield, earnings, and so on to help decide and choose better counters from the list of dividend bearing stocks and REITs. Not all of them pay as well. So these are good extra indicators to make better decisions.




I have been reading through some trading books. A common point is that most investors wannabes think it is easy and want to make a fast buck without having to do much. The truth is always that it is not as easy as it seems to make money consistently off the stock market. There is a lot of work to be done and it is a whole learning process. Those who want to do little and earn something would most likely end up losing and their money losses would become someone else's gains. So this part needs a rethink on the part of the investor. So which one are you?