Dividend Payout Ratio Secrets - PowerPoint PPT Presentation

About This Presentation
Title:

Dividend Payout Ratio Secrets

Description:

Want to see what troubled companies do to try and make it look like the dividend is healthy? Check out this shenanigan. – PowerPoint PPT presentation

Number of Views:45

less

Transcript and Presenter's Notes

Title: Dividend Payout Ratio Secrets


1
(No Transcript)
2
Welcome to Dividend Stocks Research Your premier
site for Rankings and Reviews of the best
dividends stocks around. For more info on
dividend stocks please visit our website
DividendStocksResearch.com
3
  • Hi, My name is Aaron and Im with Dividend Stocks
    Research, today were reviewing our recently
    published article

4
Dividend Payout Ratio Secrets
5
Sounds boring, doesnt it? Look Theres no way
to convince you the dividend payout ratio packs
the excitement of aclassic James Bond movie.
6
(I have a soft spot for Casino Royale.) But
heres the deal. If a James Bond movie villain
put a gun to your head, and forced you to choose
just one piece of information...
7
Just one piece of data from all the financial
data out there to pick a great dividend
stock... Youd be smart to pick the dividend
payout ratio. It could save your life.
8
The dividend payout ratio can help you find the
best dividend paying stocks, and protect you from
a lot of trouble. You can learn a lot about the
dividend stocks youre thinking about buying when
you know how to use the dividend payout ratio.
9
The good news... its straightforward stuff.
Common sense.
10
Dividend Payout Ratio Basics
11
Can the company afford to pay a dividend? And
can it afford to keep on paying it? Maybe even
be able to afford to grow the dividend in the
future?
12
These are the life and death questions the
dividend payout ratio will help you answer. Lots
of companies plow money into dividends when they
should use the money for something else.
13
Its like the guy who leases a BMW 740i when he
should repair his roof. The guy with the BMW
wants to show off, or make himself feel good.
14
Well, the company wants to show off too. It
wants to catch the attention of investors with a
high dividend. It might be hoping to lure in new
investors. Maybe it figures it can give its
sagging stock price a shot in the arm with a high
dividend.
15
You see whats going on here? Some slick window
dressing to try and cover up a problem. And
the problem is usually tied to revenue.
16
As an investor, you want to see revenue coming in
to keep the cash flow healthy.
17
The Dividend Payout Ratio and Cash Flow Dance
Together
18
Its important to have strong cash flow. Why? The
company needs to have enough cash on hand to
cover all of its expenses and to pay the dividend.
19
You can check the cash flow statement in the
financials to see whats happening. And keep in
mind, theres a difference between the income
statement and the cash flow statement.
20
The income statement tells you if the company is
making money. The cash flow statement shows you
whats happening with money coming in and going
out.
21
It changes over time. (Actually, it changes
constantly, just like the balance in your
personal checking account.)
22
Take a look at the bottom line, and youll see
the net increase or decrease for cash during a
set period, usually the most recent quarter.
23
Youll see if the cash flow for operating
activities, investing activities, and financing
activities is up or down.
24
The stronger the cash flow, the safer the
dividend. Watch out for wild swings. If there
is a wild swing in one of these three
categories...operating activities, investing
activities, and financing activities...find out
why.
25
For instance, cash flow might be up quarter to
quarter for operating and financing but down for
investing.
26
This might mean that a company has bought new
equipment or a new building. The cash it keeps
on hand for investing goes down as a result. When
it sells equipment or a building, cash flow goes
up.
27
Heres something else you might want to take a
look at. See how cash flow grows. Sometimes, it
looks like cash flow grows, but in reality it
doesnt.
28
No, this isnt slick, shady accounting. The
numbers are legit, but they reveal something
dangerous... This is something that should drive
you away if youre thinking about investing in
the stock.
29
A company can actually go out and borrow money
and use this money to pay a dividend. You can
discover this when you check out the financing
activities part of the cash flow statement.
30
Its kind of low rent, borrowing money to pay a
dividend. A little desperate. But it happens,
and a lot of investors looking for stocks with
the best dividends never see it.
31
Its just like a guy borrowing money from a
friend so he can take a date out for a fancy
dinner to try and impress her. Why would a
company do this?
32
Because its in trouble. Paying the dividend
becomes a wobbly Hail Mary pass. Want to see a
company in trouble that is struggling to pay a
dividend?
33
Check out CenturyLink CTL. An 83.7 dividend
payout ratio, and this is a technology business
that needs to be investing in research and
development.
34
It has infrastructure it needs to maintain and
update. CenturyLink used to be a model citizen.
It was an SP Dividend Aristocrat until it
couldnt grow its dividend anymore.
35
Take a look at what happened to the stock in
early 2013... a dividend investors nightmare...
36

37
Yes... the stock recovered. But its not exactly
in good health. Not with an 83.7 dividend
payout ratio. When CenturyLink revealed its 2015
first quarter performance, it reported revenues
were down. So was operating cash flow.
38
Dont expect CenturyLink to get back to where it
was in the fall of 2014 anytime soon.
39
This stock is a perfect example of the trouble
you can get into when you run into a high
dividend payout ratio combined with cash flow
thats heading south.
40
Ive mentioned CenturyLink before. It was the
stock I looked at to reveal how you can try to
predict the death of a dividend aristocrat.
41
And since I wrote about The Stink Of The Link
back in the fall... The stock price has skidded
10.
42
How To Know Youve Got A Good Dividend Payout
Ratio
43
So, you might be wondering What should the
dividend payout ratio be? What kind of number
should I be looking for? Take a look at the best
dividend stocks and youll get an idea.
44
The SP 500 Dividend Aristocrats are where youll
find some of best. Keep in mind these are big,
mature companies with solid balance sheets,
plenty of money, and no need to play games to
spruce up their dividend payments.
45
Thats why the dividend payout ratios tend to be
fairly low. Other stocks behave differently. Some
of the best small cap dividend stocks have a
higher dividend.
46
REITs, the Real Estate Investment Trusts, always
have a high dividend payout ratio. Thats
because of tax laws. But REITs are the only
exception to the rule.
47
Break the rule, invest in a dividend stock with a
dividend payout ratio thats more than 50, maybe
60 if there are special circumstances and youre
feeling unusually charitable, and youre playing
with fire.
48
The Simple Number That Tells You So Much
49
There you go. One simple number that cracks open
the window on a companys inner workings.Your
behind the scenes glimpse into whats happening
to pay the dividend.
50
Is this the kind of company that behaves like the
guy who wont spend money to fix his roof and
leases a BMW 740i, or is it taking care of
business? Not that theres anything wrong with a
740i.
51
So why not invest in safe stocks that pay you
enough dividends to make the car payments?
52
  • Want More from Dividend Stocks Research?
  • Follow us on Social Media

53
  • Want more FREE information on dividend stocks?
  • DividendStocksResearch.com

Get Your FREE Report Now
54
READ THIS FREE REPORT!
What You MUST Do to Never Run Out of MONEY in
Retirement!
CLICK HERE
Write a Comment
User Comments (0)
About PowerShow.com