Dividends & Dividend Yields: Telstra vs Microsoft

TL;DR

Dividend yield is an abstract calculation based on the past, while actual dividends are the dollar value that can be spent and enjoyed. It is important to focus on good businesses with growing dividends rather than solely high dividend yields.

Transcript

foreign and welcome to this week's video my name is Rob Gowdy and what I was Keen to chat about today was dividends and dividend yield and the reason why I brought this up is a few weeks ago I went to Peter Thornhill went full day investment seminar which was as always fantastic Pete has you know really worked out what's important when it comes to ... Read More

Key Insights

• 🍝 Dividend yield is an abstract calculation based on past dividends and share price, while actual dividends represent the tangible income received by investors.
• ✋ Focusing solely on high dividend yields can be misleading, as it does not consider the overall profitability and growth of a business.
• 👀 Dividend yield is a backward-looking metric and should not be the sole criterion for investment decisions.
• 🥳 The actual dividend amount received by investors is more important than the dividend yield ratio.
• 💗 Investing in good businesses with growing dividends is crucial for long-term financial success.
• 🥺 Dividend yield can be influenced by share price fluctuations, leading to misleading interpretations of a company's financial health.
• 🫵 Dividends should be viewed as a tangible source of income that can be spent and enjoyed.

Questions & Answers

Q: What is the difference between dividend yield and actual dividends?

Dividend yield is a ratio calculated based on past dividend payments, while actual dividends represent the dollar value that investors receive. Dividend yield does not give a clear indication of the income generated by a business, whereas actual dividends can be spent and enjoyed.

Q: Should investors prioritize high dividend yields?

Not necessarily. It is more important to invest in good businesses with growing dividends. A high dividend yield alone does not guarantee financial success, as it can be influenced by various factors such as share price fluctuations.

Q: How is dividend yield calculated?

Dividend yield is calculated by dividing the last year's dividend by today's share price, then multiplying by 100. However, this calculation only provides historical information and does not reflect the ongoing income generated by a company.

Q: Does dividend yield indicate the financial health of a company?

Dividend yield alone does not indicate the financial health of a company. It is essential to consider other factors such as profitability, growth, and payout ratios to assess the overall financial stability and performance of a business.

Summary & Key Takeaways

• Dividend yield is calculated by dividing last year's dividend by today's share price and multiplying by 100.

• Dividend yield alone does not provide a complete picture of a business's performance or the income it generates; it is more of a historical ratio.

• It is crucial to focus on the actual dividends paid by a company, as this reflects the true financial benefit for investors.