My favorite ratio as a dividend investor (video on YouTube)


#1

Hope this is appropriate here. I wanted to provide an overview of one of my favorite ratios, including a practical way to calculate it as a dividend investor.

My favorite ratios is Price to Earnings Per Share Less Dividends Per Share.

Why?

People often criticize divided investors that they really aren’t investing for total return since the dividends take away a piece of the total return puzzle. That’s true, but what if you could invest in dividend stocks that have very attractive valuations after considering their dividend payouts.

I walk through how I exactly calculate this including a few practical examples of stocks that I would consider with this type of ratio.

Obviously, this ratio is not an end all be all for investors. You need to do further due diligence on why the stock is priced that way.

I hope you find this helpful as you look for new investment opportunities!


#2

Welcome to the forum! Have you considered that earnings does not equal cash flow, and so earnings cannot necessarily be paid out as dividends?


#3

Completely fair point, earnings don’t equal cash flow. However, earnings are the starting point for cash flow and this is our best way to remove dividends. An alternative is to remove EV / FCF less Dividends less Buybacks.