There are many ways to calculate annual dividends from past periods. The calculation is simple but depends much on industry trends. Dividend history can be used to project future dividends and thus help forecast stock prices. Investors should use historical data and industry trends to interpolate market changes.
Calculate annual dividends from historical records provided by the company or available online (see Resources). There can be additional extraordinary disbursements in any given year, so first analyze whether the payment is a return of capital or a true dividend payment. The company's statement at the time of the payment will decide the proper allocation of the dividend.
Add all the dividend payments for the preceding 12 months or for the calendar year in question. This represents the sum of annual dividends. While most companies report dividends quarterly, some companies, particularly companies in seasonal industries dividends may be paid irregularly or semiannually or annually. The annual yield is the sum of annual payments made. Divide the dividend by the stock price to compute current dividend yield.
Make certain that the effect of stock splits are taken into account. Dividend payments are listed on a per share basis so it is important to multiply the dividend payment by the exact number of shares owned. Sometimes rather than a stock split, a stock dividend is paid. Adjust the dividend by the additional number of shares created.
Forecast year-ahead dividends by studying the average rate of growth for the past 5 years. Multiply the rate of growth by the amount of last year's dividends. Many large companies have dividend policies that are implicit in their history. Companies may seek to dedicate a portion of cash flow to dividends. Increased dividends tend to support higher stock prices.
Subscribe to Value Line, a subscription service for pay, or other like services. Value Line has dividend history and projections of more than 5,000 stocks. Dividends are projected on the basis of operating history, industry trends, future cash needs and growth plans of the company. Most libraries have access to Value Line products.
You can usually find specific payment information on a company website.
Be careful of using dividend yields from different websites. Every website uses a slightly different calculation and may inadvertently include payments in kind or returns of capital.
- You can usually find specific payment information on a company website.
- Be careful of using dividend yields from different websites. Every website uses a slightly different calculation and may inadvertently include payments in kind or returns of capital.
After an 18-year career on Wall Street as a trader of municipal and mortgage backed securities, Carmelo Montalbano developed a very large desktop trading application that managed more than 30 institutional portfolios. Technology and small business acquisitions continue to be his primary interest.