Dividend Payout Ratio Essentials

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Dividend Payout Ratio Essentials
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• Hi, My name is Aaron and Im with Dividend Stocks
  Research, today were reviewing our recently
  published article

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• Dividend Payout Ratio Essentials

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• Things are rarely as simple as they seem, and
  rarely as simple as wed like them to be...
  Especially when it comes to investing in the best
  dividend stocks. You know what we should do?

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• All of us who follow the market should start off
  the day with a stiff drink of humility. We should
  remember that every morning when the bell rings
  on the trading floor, were about to be treated to

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• billions of dollars worth of irrational behavior.
  Dividend investors are going to make decisions
  based on geo-political events, earnings reports,
  their own opinions, opinions from other people,
  and hunches.

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• And you know what? The market is not, and has
  never been, a sensible and rational place. But
  the good news is that virtually lost in all the
  bizarre behavior is a beautiful number.

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• One gorgeous and simple number we can look at
  that will help us make a sensible decision when
  it comes to investing in the best dividend stocks.

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• This number is easy to find, easy to understand,
  and can help you dodge some ugly dividend yield
  disasters.
• This number is the Dividend Payout Ratio.

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• The Beauty Of Dividend Payout Ratio

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• The Dividend Payout Ratio is a needle of clarity
  in the stock markets haystack of confusion. Not
  long ago, my associate Michael Jennings revealed
  some of his dividend payout ratio secrets.

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• Why is this such a helpful number? And what makes
  the Dividend Payout Ratio so important? In a
  world of hype and opinion, its a truth-teller.

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• It reveals more about the company to dividend
  investors than virtually any other single number.
  It speaks volumes. Here is how to use Dividend
  Payout Ratio to make money and how to stay out of
  trouble.

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• Dividend Payout Ratio Essential 1

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• The Dividend Payout Ratio shows you how much of
  the money a company makes goes to pay the
  dividend.Thats all it does.

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• Its a quick way to see if a company is living
  beyond its means when it comes to rewarding
  stockholders. You can see if the company is too
  stingy, too generous, or about right.

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• Dividend Payout Ratio Essential 2

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• The Dividend Payout Ratio shouldnt go too much
  higher than 60. When a company plows more than
  60 of its net profits into dividends, one of two
  things is happening..

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• It has plenty of money and could use this money
  better doing something else, or it
• has soft earnings. With soft earnings, too big a
  chunk of the quarters revenues earnings can be
  gobbled up to keep the dividend the same.

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• Dividend Payout Ratio Essential 3

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• When the Dividend Payout Ratio does go up over
  60, find out why. Now and then, its OK, and
  nothing more than a sign of an earnings slump.

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• Were witnessing this right now with the big
  global energy companies. Their earnings are down,
  but they have plenty of money lying around to
  keep paying the dividend.

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• Dividend Payout Ratio Essential 4

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• Use the number to compare two dividend stocks
  youre looking at. Heres an example. Chevron
  CVX and Exxon Mobil XOM are in the same boat,
  each stung by the plunge in crude oil prices.

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• Neither company is pulling in great revenue right
  now. (Relatively speaking.) Sure, Exxon Mobil is
  a lot bigger than Chevron.

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• But its interesting to see how the two stack up
  when it comes to taking care of dividend
  investors with dividend yield. Chevron pays a
  4.82 yield. The Dividend Payout Ratio is 127.8

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• Exxon Mobil pays a 3.68 yield. The Dividend
  Payout Ratio is 78.2
• You see whats happening? Chevron is dipping into
  its savings to pay the dividend, and Exxon Mobil
  isnt.

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• A 100 dividend payout ratio is when all the
  quarterly earnings go to pay the dividend. To
  keep its dividend the same, and avoid a dividend
  cut, Chevron needs more money than it pulls in
  from earnings. Thats why the ratio is 127.8.

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• At first blush, you might want to invest in
  Chevron...you get more income from the higher
  yield. But the lower yield you get with Exxon
  Mobil comes with a few interesting upsides.

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• The company isnt tapping into money it could use
  to make an acquisition, and in the energy
  business these days, there are plenty of outfits
  Exxon Mobil might want to buy. The war chest is
  in good shape.

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• The lower dividend payout ratio also means Exxon
  Mobil isnt stretching itself thin like Chevron.
  If crude oil prices take an even longer time to
  rebound, Exxon Mobil has the cash to ride things
  out.

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• How has Exxon Mobil been doing? Check out this
  chart for a fascinating 10-year view...

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• You know whats interesting? Exxon Mobil hasnt
  cut its dividend in ages. The dividend has been
  growing for 32 years. And look at the hits the
  stock has taken in the past 10 years.

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• Just a year ago Exxon Mobil stock was at 97.
  Today, its trading close to 80, clawing back
  from the downturn triggered by the collapse in
  crude oil prices.

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• When Exxon Mobil revenues snap back, if the
  dividend payment says the same, the dividend
  payout ratio will drop. If revenues dont just
  snap back, but roar back and explode, its not
  unreasonable to expect another dividend increase.

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• Not a bad thing.
• Seeing where income from the highest paying
  dividend stocks could be heading comes into a bit
  better focus when you watch the dividend payout
  ratio.

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• Its a nice, simple way to size up a dividend
  stock.
• And as Albert Einstein reminded us, "Everything
  should be made as simple as possible, but not
  simpler."

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