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(08.01.22) The first 5 acronyms you should understand to be a better dividend investor

When investing in dividend stocks, you should understand the language used.

I've combed tons of acronyms that get thrown around the internet or financial reports, and picked the handful I believe are most useful up front.

Understanding these, you'll be better able to read and talk about dividends in an informed way.

DPS - Dividend Per Share

Dividend Per Share is simply how much dividend is being paid for each share.

Why it's important: It tells you exactly what you will get for each share you own (pre-tax).

Dividend Yield

ok, not an acronym, but important. It's the annual dividend per share divided by the stock price. Expressed as a %.

Why it's important: It tells you about the returns on your investment for this share. *Don't judge a stock on yield alone!

TTM - Trailing Twelve Month

Regarding dividends, it refers to the dividends paid per share over the last 12 months.

Why it's important: Many companies don't pay a single annual dividend, so this is useful for calculating yield for the past year.

DPR - Dividend Payout Ratio

Dividend Payout Ratio is the proportion of the companies earnings paid out as dividends. Expressed as a %.

Why it's important: It gives you a sense of how sustainable the dividend is. A low Payout Ratio means the company is paying out less of it's earnings, all things equal, is a better signal for dividend sustainability than a high payout ratio.

EPS - Earnings Per Share

EPS is the company's net income divided by the number of outstanding common shares.

Why it's important: It's a useful value for assessing profitability of the company, and can be used to calculate the payout ratio. DPR = DPS/EPS.

Now that you understand these terms, you can feel more confident talking about and assessing dividend investment opportunities.