what's up YouTube this is Ryan Hildreth
here at my apartment and today is part
number two of the last video where we
talked about how we pick stocks and why
we talked about p/e ratios dividend and
revenue growth and today we're gonna
dive into dividend yield and why this is
so important in a long term investment
strategy
so what is dividend yield well let's say
we buy a share of Apple for $100 and
they pay us five dollars cash per year
in dividends that would be a 5% yield
you just divide the five dollars they
pay you
divided by the $100 share price which is
a gives you a five percent yield and in
Daniel Paris's strategy from the
distributed dividend investor he calls
it the five by five portfolio and this
is really what I model in all my
investments where the company has a five
percent dividend yield and five percent
dividend growth per annum so how do we
check those things I mean on Google
Finance you it'll show you the dividend
yield but the dividend growth you have
to do a little bit more extensive
research you have to see their
historical dividends and calculate the
growth of each year so we try to model
the five by five portfolio but that's
fine if a company that you want to
invest in pays a two percent dividend
which is you know down here the growth
the dividend growth has to be eight
percent so the growth has to be higher
if the dividend is lower vice versa if
the dividend growth is lower their yield
has to be higher so a prime example I
use is this year invested in target
their stock price was down their p/e
ratio was super low I think their p/e
ratios around 14 which is below the
market average and I wanted to pick this
company up at a discount
I believe in Target I believe in their
fundamentals as a company and I bought
tons of shares of Target and I bought it
at a price that was pretty low and then
they had corporate earnings that were
phenomenal and their stock jumped by 10
percent so I made 10% on just the share
price appreciation which is great love
10% I beat the market which is a you
know the more average market return is
7% but on top of that 10% they're paying
me 4% dividend yield so I had that on
top of the 10% which I made a 14% return
this year alone and that those are the
type of opportunities we want to take
advantage of finding companies with low
p/e ratios that are trading at a
discount invest in those companies and
make sure that they pay high dividend
and have a great dividend growth so that
in the long term you you got that price
at a discount and they're paying you
cash every year and that's that dividend
is growing every year
along with their share price which is
growing every year so you're making
money from you know not only the share
price appreciation but the cash they're
giving you in dividends so if you have
any more questions about this make sure
to email me at Ryan Hildreth rh at
gmail.com I'll also have a spreadsheet
of where I do all the this analysis on
the top companies that I invest in and
if you want that go ahead and email
as well thank you take care
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