He might mean what the percentage Dividend will be. i.e. currently it is about 5% with the stock at ~ 36. If the stock is at 50 and the divvie increases its typical .01/year , you can do that calculation. not sure it means or proves much.
jwaltz -- You usually seem brighter than this. Dividends are not a function of the stock price. It's the other way around.
T has increased its January quarterly dividend by 1 cent every year since 2009.
Jan 2008 = $0.40
Jan 2009 = $0.41
Jan 2010 = $0.42
Jan 2011 = $0.43
Jan 2012 = $0.44
Jan 2013 = $0.45
Jan 2014 = $0.46
Notice a pattern?
Jan 2015 = $0.47?
Jan 2016 = $0.48?
$0.48 x 4 = $1.92 annual indicated dividend, which, if the price is $50, is only a 3.84% yield.
If the market requires a 5% yield the price would be only $38.40.
Sumfax ! Thank you for that great explanation ! I know about the .01/year increase but, did not know how to calculate the fluctuation of the dividend with price movement. My calculations are as follows!
$1.92 / $50 share price = .0384 x 100 = 3.84 % ! When you say " if the market required a 5% yield the price would be $38.40. Meaning, the market would not buy over that price ?
only in a general sense, best to use history of div. to project future. a chart on price is often more volatile than div. good companies try to keep div. stable and increasing. a change in div. can cause a big change in price. especially if reduced or suspended. a good div. is one that at least matches inflation.
I agree with your statement tsjdiet ! An increase in short term interest rates would also have an effect on dividend paying stocks as well. Even though they are talking about increasing rates, the consensus indicates rates will not increase for quite some time ! Agree ?