Question on stock research

[Paul24]

Ok getting into the nitty gritty, say I pick woolworth (WOW) shares to start researching (I'm using comsec)
Say I brought them 1 year ago, on the 9/10/09 at 29.15.
Today they are worth say 30. So that is a yearly increase of 2.9%.

Under the research tab it says Dividend yield 4%, was that the last yield? or was that what it paid over the year?

Then down a bit more under growth rates, it says 10.6% for dividends under the 1 year. Does this mean it paid 10.6% dividends for the year, plus my 2.9% growth means I would of made 13.5%?

 

[ROE]

Ok getting into the nitty gritty, say I pick woolworth (WOW) shares to start researching (I'm using comsec)
Say I brought them 1 year ago, on the 9/10/09 at 29.15.
Today they are worth say 30. So that is a yearly increase of 2.9%.

Under the research tab it says Dividend yield 4%, was that the last yield? or was that what it paid over the year?

Then down a bit more under growth rates, it says 10.6% for dividends under the 1 year. Does this mean it paid 10.6% dividends for the year, plus my 2.9% growth means I would of made 13.5%?

Dividend yield usually calculate on current price with last known yield paid
say stock XYZ last year paid $1 and the stock is currently trades $20
then it's yield 5% or work out when they use stock price as a yield calculation

Growth rates is earning got nothing to do with share price
again say stock XYZ earned $1 last year this year it earns $1.10
then the EPS growth is 10%.
usually earning grow usually go hand in hand with share price grow..

Got nothing to do with your total return, and the market is forward looking
so share price most likely to factor in that sort of information already so

when that information is available sometimes you don't see the price go up much
or at all..... unless analyst predict 10% and it do a a white rabbit magic and pull 30%
then there will be strong price reaction...

if you want to calculate total return then
yield + (share sell price or currently trading - purchase price)

and convert to percentages and stuff like that...

you need to do some home work and get use to all the terminology first.
no point get into that stuff if you don't understand terminology.

 

[Paul24]

What do you mean by stock xyz earned $1? from the dividend payout?

How do I find out what the stock was trading at the time when the payout was?

Also how are payouts calculated, is it something the board decides on, or does it have to do with the share price?

So much learning I have to do.

 

[So_Cynical]

http://en.wikipedia.org/wiki/Stock_market
http://en.wikipedia.org/wiki/Stock_trader
http://en.wikipedia.org/wiki/Value_investing
http://www.investopedia.com/terms/e/eps.asp
http://www.investopedia.com/
http://www.asx.com.au/resources/education/index.htm

 

[Julia]

What do you mean by stock xyz earned $1? from the dividend payout?

You need to separate out company earnings from whatever the dividend is, as ROE has said below:

Growth rates is earning got nothing to do with share price
again say stock XYZ earned $1 last year this year it earns $1.10
then the EPS growth is 10%.

If the stock has earned an additional 10 cents for every dollar of its market capitalisation this year over last year, then its Earnings Per Share growth is that 10 cents, or 10% as ROE has said above.

The company will decide then whether they want to pay all or part of this growth out in dividends, or perhaps pay off debt, or perhaps plough it back in to growing the company.

In other words, EPS growth does not necessarily get reflected in increased dividends.

How do I find out what the stock was trading at the time when the payout was?

At asx.com.au, you can click on 'Dividends' type in the stock code of the company, and you will get the dates and amounts of all the dividends.
Then go to the price chart and you will easily see what the stock was trading at pre and post dividend.

Also how are payouts calculated, is it something the board decides on, or does it have to do with the share price?

The board will decide and make an announcement well before the ex dividend date.
During the GFC quite a number of companies reduced their dividends, or even wiped them.

So much learning I have to do.

Sure, but it's very 'do-able'.
I'd suggest working through the education modules on the ASX website.
You won't get far until you acquire some understanding of the basic terminology.

 

[Tysonboss1]

Ok getting into the nitty gritty, say I pick woolworth (WOW) shares to start researching (I'm using comsec)
Say I brought them 1 year ago, on the 9/10/09 at 29.15.
Today they are worth say 30. So that is a yearly increase of 2.9%.

Under the research tab it says Dividend yield 4%, was that the last yield? or was that what it paid over the year?

Then down a bit more under growth rates, it says 10.6% for dividends under the 1 year. Does this mean it paid 10.6% dividends for the year, plus my 2.9% growth means I would of made 13.5%?

You have alot of reading to do.

 

[mallymcl]

On the topic, which blue chop stocks do you guys own? I was looking at Fosters but all this dollar flucuaton is going to really hurt their exports.

 

[Tysonboss1]

On the topic, which blue chop stocks do you guys own? I was looking at Fosters but all this dollar flucuaton is going to really hurt their exports.

As far as blue chips I own APA, TOL, WDC. (all are pretty fairly priced) APA is probally the best value. Based on my calculations I think any thing less than $4.16 should see it perform decently for you over time.

 

[ROE]

What do you mean by stock xyz earned $1? from the dividend payout?

How do I find out what the stock was trading at the time when the payout was?

Also how are payouts calculated, is it something the board decides on, or does it have to do with the share price?

So much learning I have to do.

Stock is a little different from property investment if you coming from property it can be confusing with earning and yield.

Property investment most of your earning (rental) coming as yield
so a property selling for $500K and you can rent it for $25K then it yield 5%
excluding fees and charges.

Stocks price are based on earning and from earning the board decides how much dividend should be paid out to shareholders after they factor in business expansion, debt due etc....

stock could earns $1 a share and you get 50cents dividend that mean the payout ratio is 50% of the earning ..... that other 50 cents is kept in company account for business expansion, it's still shareholder money in company account rather than in your own personal account.

also dividend is purely a board decision and there is no law that force them to pay out dividend...so yield is not a sure thing, when thing get tough they may not pay out dividend to keep the company afloat..

banks can also force the board hand and tell them to stop paying dividend as part of banking condition for company with debt etc...

that why people put money in cash and bond because these payment are 100% guarantee where as dividend isn't so..

so if you want reliable dividend it is very very important you pick good business so they can pay dividend in good time and bad ..... stock like
WOW CBA CAB WWA TRS and many more has never ever stop paying dividend, on the contrariety most of them pay increase dividend the longer they stay in the business due to inflation and increase earning....

anyway that just a start and none of the stock I mentioned are recommendation just something I know and I do have interest in them

 

[Paul24]

Ok lets see if I'm on the right track here.

From commsec I can see that CBA payed $1.20 on the 6/04/10, EX date was 15/02/10.
Then on 01/10/10 it payed $1.70.

Now if I brought 1000 shares on the 29/01/10 at $54.30 each, so $54,300 spent.

Then from then to now I will have had two payouts of $1200 and $1700 = $2,900.

So 2,900 of 54,300 is 5.34%

But then If i sold my shares today and got $50.96 each, ($50,960)

Then 54,300-50,960+2,900 = -$400

So in this time span I would have lost 400/54,300 = 0.73% of my money.

Obviously that is a bad scenario, but am I correct in my calcs/reasoning?

 

[Julia]

Ok lets see if I'm on the right track here.

From commsec I can see that CBA payed $1.20 on the 6/04/10, EX date was 15/02/10.
Then on 01/10/10 it payed $1.70.

Now if I brought 1000 shares on the 29/01/10 at $54.30 each, so $54,300 spent.

Then from then to now I will have had two payouts of $1200 and $1700 = $2,900.

So 2,900 of 54,300 is 5.34%

But then If i sold my shares today and got $50.96 each, ($50,960)

Then 54,300-50,960+2,900 = -$400

So in this time span I would have lost 400/54,300 = 0.73% of my money.

Obviously that is a bad scenario, but am I correct in my calcs/reasoning?

Yes, you're quite correct. But you also need to take into consideration the franking on CBA shares which I think is 100%. Without knowing your tax situation, I can't say whether the franking would mean you'd come out pretty even.

However, why would you sell CBA shares at a loss? Unless perhaps you need the cash? Banking shares have been pretty volatile for a while now and will probably continue to be, so if you want to sell them, you might consider waiting for an increase in the SP which will eventually occur.

Alternatively, you could do as many do and regard them as a long term hold.

(The above does not constitute advice, etc etc.)

 

[Paul24]

Of course if I had the shares I wouldn't sell them at a loss but I was just trying to get an understanding on the calculations.

Ok now that I understand that, I have question two.

In my previous example the investment made 5.34% through dividends, and lets say there 100% franked.

If I had that money in a bank and made 6.5%, and I'm in the 37% tax bracket, then out of that 6.5% I made in interest I would have to pay 37% of it to tax.
37% of 6.5% = 2.405% so 6.5%-2.405% = 4.095%

So after tax I would end up with 4.095% profit if I had my money sitting in the bank.

But if I had them in the shares and made 5.35% through dividends that are 100% franked, does that mean I get to keep 100% of the profit?

 

[Paul24]

Actually I know my above statement is wrong, but I'm not clear on the correct answer. I'm reading up now about it but if someone could correct my above example for me I would greatly appreciated it!. Thanks.


EDIT: Ill try again (trying to learn here)

So if I receive $500 of fully franked dividends, It means I get $214 of franking credits.

As the company made $714, and 30% of that which is $214 was paid as tax and the 70% which is $500 was paid as fully franked dividends.

So now if I made 88k for the year, I add $714 which means my pre tax income is $88,714.

Which means I am paying 37% on that 714 which is $264. so 714-264= $450.

So really out of that $500 dividend payed to me I only get $450 once tax time is said and done.

This is because the company payed 30% but I need to pay another 7% to match my tax bracket.


Hows this sound?

 

[Julia]

So if I receive $500 of fully franked dividends, It means I get $214 of franking credits.

As the company made $714, and 30% of that which is $214 was paid as tax and the 70% which is $500 was paid as fully franked dividends.

So now if I made 88k for the year, I add $714 which means my pre tax income is $88,714.

No. You just add to your annual income the $500 from the dividends, not $714.
Then when you calculate your tax owing, the $214 franking credit gets deducted.

If you look at the tax form, this will become clearer than trying to think about it in the abstract.


Another option is if you hold the shares within Super you are only paying 15% tax.