Monday, June 18, 2007

Banks Dividend Yields & Payout Ratios

I have seen a number of posts recently comparing the yields of various banks to one another in an attempt to determine the “best buy”. Although, I think that the yield is important I don’t think that the yield by itself is a useful number even for those looking exclusively for dividend income. In my opinion you also need to compare the payout ratio of the banks in order to ascertain if:

1. The dividend is sustainable
2. The dividend has room to grow
3. The business has sufficient excess capital to grow

The payout ratio is a simple ratio that investors can easily calculate.

DIVIDEND PAYOUT RATIO = DIVIDENDS PER SHARE/EARNINGS PER SHARE

In tomorrows post I’ll compile both the yields, payout ratios, current PE and forward PE for the big Canadian banks and on Wednesday I’ll do the same for the big US banks.

9 comments:

moneygardener (AKA investor99) said...

I think there is something at play here that most people fail to mention about yields. Sometimes the reason for stock having a lower yield than a competitor has more to do with the recent performance of its share price compared to that competitor. For example compare RY to BMO. Does BMOs yield mean its a better buy? Maybe? But it also means that RY have been able to grow earnings quicker, and hence attract more buyers that lifted the stock price causing the yield to drop. Is this likely to continue? Its a bit of 'buy the recent winner' or 'buy the recent loser' (not saying BMO is a loser).

Anonymous said...

Hey, landed on your blog, nice stuff. I found a cool new tool for our blogs... www.widgetmate.com It helps get latest news for our keywords directly on to our blog. I added it on mine. Worked like a charm.

QUALITY STOCKS UNDER 5 DOLLARS said...

Dividend stocks are an excellent way to invest in stocks.

Anonymous said...

sublime design,
if that was my room Id totally grow some.
.. "tomato plants"... at the end of the mattress as well.



My blog - order arrow sheds

Anonymous said...

in buy to get rid of stomach fat/lose excess
weight you require to accomplish alot of cardio workout.

Cardio exercise will contain running, walking .
. and so forth.. check out this internet site they contain
very good cardio exercising., and soon you'll eliminate that stomach fat/lose weight. Never drink alot of sodas and leave the junk foods. The genuine reality of obtaining abs is undertaking a lot of cardio exercise.Good luck

Check out my weblog :: weight loss before and after success stories women

Anonymous said...

Wonderful article! I should state that I really take pleasure
in reading through the things on your web site
mostly simply because it's a breathe of fresh air from all of the BS out there.

Also visit my weblog: gain muscle weight men

Anonymous said...

Superman would win, there is just so much he can do to give him a tactical advantage more than The Hulk.


Here is my website: secrets of superman stamina revealed free download

Anonymous said...

I am possessing a small problem. I cannot subscribe for your rss feed for many purpose.
I'm utilizing google reader by the way.

Feel free to surf to my web page ... six pack shortcuts free

Anonymous said...

This things will not function at all. Purchased a bottle.
Utilised it for thirty days. Dropped one pound. Produced
me severly constipated. Wouldn't waste your income in any way with this item.

Take a look at my homepage :: insane home fat loss workout free