Measures of Dividend Policy

Measures of Dividend Policy

154

? Dividend Payout = Dividends/ Net Income

? Measures the percentage of earnings that the company pays in dividends

? If the net income is negative, the payout ratio cannot be computed.

? Dividend Yield = Dividends per share/ Stock price

? Measures the return that an investor can make from dividends alone

? Becomes part of the expected return on the investment.

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154

Dividend Payout Ratio: January 2016

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Dividend Payout Ratio: US and Global

18.00%

16.00%

14.00%

12.00%

10.00%

8.00%

6.00%

4.00%

2.00%

0.00%

100%

Aswath Damodaran

US Global

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Dividend Yields: January 2016

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16.00%

Dividend Yields: US and Global Companies

14.00%

12.00%

10.00%

8.00% 6.00%

4.00%

2.00%

0.00% 8%

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US Global

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157 Aswath Damodaran

Dividend Yields and Payout Ratios: Growth Classes

158

50.00% 45.00% 40.00% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00%

0-3%

Dividend Yields and Payout Ratios: By Growth Class

4.00%

3.50%

3.00%

2.50%

2.00%

1.50%

1.00%

0.50%

3-5%

5-10%

10-15%

15-20%

20-25%

>25%

0.00%

Dividend Payout ratio Dividend Yield

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