How to calculate how much a stock dividend pays?
I am trying to learn about stocks and dividends.
For the sake of helping me understand I’m looking at KO (Coca Cola) stocks.
As I write this the price is 36.29. The dividend yield is 4.81%.
Now how do I translate to how much money I’d make from dividends? Do I need more info or are those the only two numbers I need?
Please try to keep it simple.
@Eddie W ‘s answer on the value of dividends depends entirely on your investment strategy. If you are a daytrader…a short term player or someone who never holds a stock for more than a month or two and then sells then YES dividends are not very significant. BUT if you are a BUY/Hold type of guy….dividends can mean a lot..
Your example of Coca Cola is WRONG as far as dividend yield is concerned…as you can see the Dividend rate is 2.811% per year paid quarterly $0.255 per quarter per share
ALSO…I don’t know about the USA but in Canada dividend taxation rate is 1/2 than that of simple interest so if your holdings are out of a tax sheltered account umbrella….you are netting more money with dividends than simple interest PLUS you have the benefit of capital gains on the stock if you choose wisely AND if you reinvest your dividends into more of the same stock….you compound your dividend gains…as well as your capital growth.
To first answer your question…the dividend yield is the overall dividends for the year / the current value of the stock….so that yield varies daily…not because the amount of money you get from dividends varies but because the share price changes.
Let us use your example of Coca Cola (KO) and say we invested $10,000 into the stock 5 years ago…let us see how much money you made in dividends if you reinvested that yearly dividend back into stock.
In Nov 9, 2007 we shall say you bought $10,000 worth of KO at $60.83/share for a total of 164 shares…we don’t get fractional shares. So we have started with 164 share in Nov 7/2007…let us first look at the dividend payouts over this time period
So we don’t get our first dividend until Feb of 2008 and to summarize this table for each year we get the following in dividends…NOTE we will take the $ left over and add it to the next years dividends when calculating how many new share we can buy from the dividends
Year…….. No.shares……… Dividend total…………… Year end ….. Additional shares
……………………………….. Shares x dividends…… Share price
2008…….164……………….. $249.28……………….. $45.27………. 5 shares + $22.93
2009……. 169………………. $277.16……………….. $57.00………. 5 shares + $ 7.84
2010……. 174………………. $306.24……………….. $65.77………. 4 shares + $ 43.16
2011……. 178………………. $334.64……………….. $69.97………. 5 shares + $ 15.21
Now 2012 resulted in a stock split 2:1 in 07/29/12….this doubles our shares but haves the dividend. This really does not affect the overall dividend return but may in future increase our capital gains depending on how the share price performs in the future
2012a…. 183………………. $186.66
2012b…. 362………………. $184.62
2012 total dividend……….. $370.84 + 15.21 = $386.05 adding in last year’s left over
at the current price of $36.29….if this stays the same we are looking at adding 10 shares at year end. NOTE: over these 5 years….(through the roughest times of the 2008 crash and not so great recovery) by reinvestment of the dividends…we have increased our dividend yearly return by about $120/year….NOTE: this would be true in a tax sheltered account….there would obviously be tax implications to consider in a non-tax sheltered account.
So the upshot is for Coca Cola from Nov 2007 we invested $10,000 which at the current price of $36.39/share and 362 shares is worth $13,173.18….. A gain of $3,173.18 or 3.2% …. Not a bad return considering the slaughter of 2008-2009 where the KO stock lost about 50% of its value during that time period
If you strictly saved the dividends without reinvestment…you would have made
(164shares x $1.52) + (164 x $1.64) + (164 x $1.88) + (164 x 1.02) + (328 x 0.51) =
249.28 + 268.96 + 308.32 + 167.28 + 167.28 = $1,161.12
Your shares after the split are worth $328 x 36.29 = $11903.12
So including non-reinvested dividends the total would be $13,064.24
So you make a few extra dollars by reinvesting the dividends into additional shares but more importantly you have 38 extra shares working for you which will pay off better times when KO’s share price rises. NOTE: this is an example including the 2008-2009 crash…not the best of times.
I hope this exercise helps….I disagree with @Eddie W that dividends are useless…with time they get more and more significant if you are a LONG TERM HOLDER….not so much if you are a day trader or a swing trader….I will agree there.
what are some good ways to earn money fast?
Im 13 and im trying to save up some money to go on a trip with my friends next spring break, any ideas will help!! Thanks!!
Under supervision of my friends parents. That part doesn’t matter, the point is, I need to earn money one way or another.
General Strategies on Saving Money and Earning More Money
Save as much money as you can! You’ll be surprised as to how quickly you can save a lot of money!
Here are a few suggestions:
Ways To Save Money & Ways To Earn More Money (Updated on 08/07/2010)
Don’t go out to eat. Example: don’t eat out at fancy, high-class restaurants. Instead, eat at a fast food restaurant or cook a healthy meal at home. It is much cheaper than the alternative.
If you are a teen or a young adult, you might want to hold a bake sale. You can have your other friends help you out, so that you can help attain your goal of saving and/or making more money.
If you have a habit of buying new clothes very often, then resist the urge to buy new clothes for a little while. You could potentially save a good amount of money.
Take personal finance courses online or at a high school or college/university.
If you are a teen or a young adult, you may want to have a dog-walking service.
To help you manage your money, try http://www.mint.com/
Talk to a customer service representative at a bank or other financial institution and learn more about financial instruments.
Don’t go out to watch new movies in theaters. Watch movies on your TV at home. Rent movies using Netflix.
If you are a teen, you may want to think about babysitting. You can babysit your neighbor’s children.
Don’t spend too much money when going out with friends. Have a budget in mind before you actually meet up with your friends.
If you are a teen, you could try to mow the lawn. Many of your neighbors probably want their lawns to be mowed at a fraction of the price that they pay others to do the same work.
Invest your money in a CD (certificate of deposit). You can hold your money in a CD for 6 months or even a year. It generally pays more interest than the interest you get from a traditional savings account from a bank.
If you are a teen, do chores around the house. Your parents will appreciate it and you might get some money for it.
If you like to invest your money in the stock market, then you may want to invest your money in a commodity, such as gold. The value/price of gold is expected to increase in the future.
If you are a teen, then make sure to save the money that you get from your allowance (if you get an allowance).
If you like to invest your money in the stock market, then you may want to invest your money in specific large-cap and medium-cap companies that you trust. Apple (Stock Symbol: AAPL) and Google (Stock Symbol: GOOG) are two such stocks where you can choose to invest your money.
Try to sell something of value that you are willing to part with. Sell your old stuff on websites where many people make purchases, such as ebay or craigslist. You could also sell your stuff through a garage sale or a yard sale.
Try to hold a donation drive where your family, close friends, neighbors, and other acquaintances will be able to help you out and donate a little bit of money.
If all else fails, borrow money from other people (brothers, sisters, close friends, relatives, grandparents, neighbors, acquaintances, etc.) in order to get a short-term loan.
Stocks For Dummies will you share wisdom?
I know NOTHING about STOCKS I know my mother died & was an employee at Walmart for several years & I found out she had some stocks because I found a divined check for 500 from 2010. I called today and they are sending me paperwork to transfer everything to me. Will I receive dividends that never were cashed? Walmart stock thing is 69.63 so if she had 5 share and I wanted to sell it It would be worth 279 right? Am I doing this wrong? How do people make money with stocks and you sell it for 279 why are the dividends checks so much? Confused Person help!
Dividends are paid by most companies on a quarterly basis. Your mother would have already received all of the dividend checks, unless she elected to have them reinvested in more stock. This is known as DRIP investing (dividend reinvestment plans). If you hang onto the stock you will continue to receive the dividend checks you are entitled to as a shareholder, after all you are a part owner in the company now.
The given market price for stock does not necessarily mean it will sell for that amount. When you go to sell, known as a trade, your shares will trade at whatever the market is willing to pay. This means, someone else on the other end must be willing to buy it and at a given price. With Wal-Mart you should have no problem selling them at the going rate. You will have to pay a fee for the sale $5-10 and will have to pay taxes on the profits.
If your mother only owned a small number of shares it might be a great opportunity to get started investing or increase what you already have. Think of it as a gift to start saving for the long term. Even if you don’t buy anymore stock, you could keep collecting the dividends and use them to buy more shares. If you really needed the money you could just take the checks every 3-4 months and use them. If you are not interested, you can just call back to the transfer agent that you would like to sell.
I hope this helps. Sorry for your loss!
How can I make money working from home?
I have bookkeeping experience and am trying to run a home business but have not been able to find alot of contacts. I tried having a website with no response. I am looking for a legitimate way to make money at home. I have my own computer, lots of references and my accounting degree
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How do I find an OTC that will help me buy a penny stock?
Okay, I know everyone hates penny stocks, but call me Miss Longshot cause AZD-t just went up 5 percent yesterday, after their excellent presentation on BNN about their first ever pure electric fleet vehicles and the contract they just got with Canada Post. I use a discount broker for my trades so any recommendations on a broker with low fees that will let me buy stocks OTC would be appreciated. Thank you.
An OTC transaction requires the middle man to partake in the risk of the stocks that he sells in that he must have an inventory. You won’t find anyone who does this with penny stocks and manages to remain in business for long. 5% is just a blip, probably the difference between a buyer meeting an ask price and a seller settling for a bid price, indeed if you look at their stock chart, the price moves tend to be in 5 cent increments so the penny spread in the bid and ask isn’t backed by a lot of market depth. People are probably putting out teaser asks to mask their real asks a good nickel above.
There are much better options that penny stocks literally. Even options without risk.
For example because people are bearish about retail. You can extract that sentiment from Walmart’s stock by doing the following:
Short Dec. 17, 2010 put options with a strike of $55 at $2.02 (current bid price)
Short WMT stock at $53.83 (current bid price)
Buy Dev. 17, 2010 call option with a strike of $55 at $0.64 (current ask price)
Put proceeds of the two short sales aside as you’ll need most of it to cover.
On Dec. 17 if Walmart has dropped in price, the people who bought the puts from you will exercise them forcing you to buy their shares of Walmart for $55 which you use to cover your short position in Walmart stock, the call option would be out of the money and expire worthless. This means you make $2.02-$0.64-($55-$53.83) or $0.21 on every $0.64 you spent on this play (ignoring commissions, taxes and interest paid on borrowing the securities for the short). If the Walmart stock price went up above $55 then you would use your call option to buy stocks to cover your short position, no one in their right mind would exercise a put to sell at lower than market value (i.e.: the puts are expiring out of the money and worthless) but should someone happen to do so, just buy their stock and sell it at the higher market price, this means you make $2.02-$0.64-($55-$53.83) or $0.21 on every $0.64 invested in 34 trading days regardless of what the Walmart stock price does, that’s a 32.8% yield in just 34 days which given that there are about 250 trading days in a year, that would extrapolate out as 705.69% per annum compounded. Of course, a lot of that will go to commissions and taxes unless you had a lot of money to leverage this play with and as most of it is shorts, you would need a lot of margin hence credit to do it and finding such opportunities isn’t always possible; but the return is whether the price goes up, down or stays the same. That’s a hell of a lot better than hoping for a 5% uptick on some arbitrary commentary.
These opportunities happen with hot popular stocks that are in no danger of disappearing so why would you chase a phantom 5% on a penny stock. The hedge companies don’t suck up all of these opportunities cause many of them don’t have enough market depth in the options market to make it worth their while. As it is, you have to watch the numbers carefully to make certain you amortize the commission costs as you’re living in that very small spot between not profitable and profitable enough for the big boys. Although the yields look astounding, you’re really just scrapping pennies together but these are being scraped off quality stocks not long shots.
Unless they have some kind of patent, a small EV manufacturer has no protection against the big auto manufacturers that have all said they would be entering the market. The barriers of entry are against the small guys in that industry and the big guys are playing with government money now. I would want to look at their management team, production team and their strategy as how to co-exist with EV’s from the big three before I would even remotely consider AZD-t. Besides the adage is “Sell on News” not “Buy on News”.
Now what Azure has going for it is that it looks like Ford is using their power trains to convert their truck and vans to EV’s for the commercial market. From that perspective, it has a chance of being bought out by Ford in the future but unless they have some proprietary technology, that isn’t going to happen. Remember AZD-t reported negative earnings and for them a ten unit order is a big deal. I’d view AZD-t as a lottery ticket but a good cheap lottery ticket.
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