Thursday, April 26

The Dividend Project - Bringing it all Together

Don't let the title of the post mislead you - I'm not done yet!

But today I wanted to bring together some of the numbers that we have seen in analyzing the major banks and start to talk about how to set a price at which you would want to buy a stock. Here then is a summary using today's numbers of the five major banks (click image to enlarge):

Now I know these are a lot of numbers, so I will go through them logically.

First, the bottom two sections are my raw data. This time I did not rely on anyone else's calculations, I went and got the information to calculate it myself. I got the last four quarters' earnings and dividend numbers and added them up to get the 12 month trailing numbers.

Then, starting back at the top:
  • The yellow row is today's closing prices.
  • The white row is the 10 year growth numbers from the Globe article that I found a few days ago. I just kept them in there for reference.
  • The first orange section is dividend yield. For the trailing dividend yield I divided the trailing 12 month dividend from the orange section below by today's closing price. For the current dividend yield I took the last dividend times 4 and divided by the lcosing price.
  • The first blue section is the price to earnings ratios. For the trailing P/E, I divided the closing price by the 12 month trailing earnings. For the current P/E, I divided the closing price by 4 times the last earnings (note: this is sometimes called forward p/e, I believe).
  • Finally, I calculated payout ratios be dividing trailing dividend by trailing earnings and last dividend by last earnings.

So now comes the big question - are these a good buy at today's price? If not, at what price? And despite my big talk at the beginning of this post, I am going to chicken out and not name prices today. I want to do more reading about these numbers and what they can represent because as I look at them my head goes round in circles. I can come up with an explanation for white in one breath, and black in the next.

I really like this little chart though. I feel like finally I can see where these numbers are coming from and how they all relate to each other.

I'm going to try to run these numbers for MY COMPANY. Okay, I know it sounds strange and it may not be exact since my company doesn't have a real share price, but it will relate it to something that I know really well. Stay tuned, folks. This story is just about to get interesting....


Mike said...

Great series on the dividend stocks. I'm currently researching a plan to possibly buy some of these stocks on leverage. I posted my plan on the FWR forum and learned some good info from some of the experienced minds there about dividend stocks (and leveraging).

0xcc said...

Actually, a forward P/E is the P/E using the *predicted* earnings of the company for the next year. A lot of companies will give guidance for the next quarter or next year as to what they expect their earnings to be and analysts also try to guess what the revenue/earnings of the company will be and that is what is used to generate a 'forward P/E'. said...

Diva, keep an eye on BMO. They had some negative press today about some losses they took on natural gas trading. They gapped down this morning, which could start a new down trend. I personally will be buying BMO when the their dividend yield reaches around 4.15% which equates to a stock price of around $66-$67.

the money diva said...

MDJ - thanks for the tip. The BMO story is posted now!

Oxcc - I wondered if I had the definition right. Thanks for clarifying!

mike - I'm glad you are enjoying the series. I will definitely check out the link.


Canadian Money said...

After I finished my 2006 income tax, I did a what if analysis to find out how much additional tax I would pay if I had dividend income. I just posted the results.