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How To Use The Dividend Yield
Education | 19 January 2015
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Many investors are obsessed with dividends. We don’t find that surprising, after all, dividend income, is a recurring stream of income.

But what does it mean when people ask, how much is the yield? and you hear, “Oh that’s not enough to beat inflation”.

The yield, in very simple terms, is the return of investment (ROI) that you’ll be getting from the stock, excluding capital gains.

This means that with everything held constant, where the share price doesn’t move based on the current dividend payout per share per year that is your total return of investment on the stock.

The formula for dividend yield is expressed as: Annual Dividend Per Share / Current Share Price

Let’s run this through an example.

Corporate financial information of Asian Pay TV Trust

As seen in the attached screenshot, you can see that Asian Pay TV Trust (APTT) commands a yield of 10.6 percent.

Launching the financials, click on the FY tab to get the total dividends per share paid out for the year.

Full year financials of Asian Pay TV Trust

As you can see, the total dividends per share paid out by the company for FY13 is $0.0893.

Referring back to the current price of $0.845 as shown in screenshot 1, we will take $0.0893/$0.845, which will give you 10.6 percent.

Because APTV is a trust, it naturally has a high payout ratio as a mandatory payout compliance for Trusts and REITs in Singapore.

Do note that if the company is not a REIT or a Trust, and commands a payout ratio that is excessively high compared to its peers, it could be something to look deeper into and not be led by the greed in the payout.

Payout ratio can be easily calculated as Annual dividend per share/Full year earnings per share.

You can look for stocks with high yields using preset filters on Shares Investment’s website.

Firing the “Highest Yield” filter in Shares Investment’sPrices” page, you’ll see the full list of stocks ranked according to their Yield.

Yield filter of high yield stocks

The benchmark that most investors want their investments to beat, would be that of inflation (approx 3 percent).

However, we at Shares Investment think the benchmark should be the rate of your CPF Special account, which is paying some 4 percent per annum, and that should be the minimum ROI your stock should be able to beat.

Remember to do your due diligence on the company and find out why it’s commanding such yield, and is it bleeding money and still paying such dividends.

Have fun finding your high yield stocks!

Asian Pay Television Trust  0.168 -- --   
Business: First listed biz trust in Asia focused on pay-TV biz.

Insight: Feb-19, FY18 total revenue and EBITDA fell 6.3% an... Read More

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