How to interpret a 1,372.55% dividend payout ratio (GSK)?
I don't think it makes sense to allow accounting numbers that you are not sure how to interpret as being a sell sign.  If you know why the numbers are weird and you feel that the reason for it bodes ill about the future, and if you think there's a reason this has not been accounted for by the market, then you might think about selling.  The stock's performance will depend on what happens in the future. Financials just document the past, and are subject to all kinds of lumpiness, seasonality, and manipulation. You might benefit from posting a link to where you got your financials.  Whenever one computes something like a dividend payout ratio, one must select a time period over which to measure.  If the company had a rough quarter in terms of earnings but chose not to reduce dividends because they don't expect the future to be rough, that would explain a crazy high dividend ratio.  Or if they were changing their capital structure.  Or one of many other potentially benign things.   Accounting numbers summarize a ton of complex workings of the company and many ratios we look at could be defined in several different ways.  I'm afraid that the answer to your question about how to interpret things is in the details, and we are not looking at the same details you are.
Damn. I just looked to confirm. Without reinvestment (but just holding dividends), looks like the return through 2013 is 0 and then there have been decent returns since 2013, but holy shit, it does not look good at all. All of that not adjusted for inflation.  I wonder how much of that shitty performance can be reasonably classified as 'necessary' due to the spin-off of GE Capital, which generated a lot of the profit for GE but really was a huge problem for them when liquidity became scarce in 2008. What you're referring to is the yield.  The issue with these sorts of calculations is that the dividend isn't guaranteed until it's declared.  It may have paid the quarterly dividend like clockwork for the last decade, that does not guarantee it will pay this quarter.   Regarding question number 2.  Yield is generally an after the fact calculation.  Dividends are paid out of current or retained earnings.  If the company becomes hot and the stock price doubles, but earnings are relatively similar, the dividend will not be doubled to maintain the prior yield; the yield will instead be halved because the dividend per share was made more expensive to attain due to the increased share price.   As for the calculation, obviously your yield will likely vary from the yield published on services like Google and Yahoo finance.  The variation is strictly based on the price you paid for the share.  Dividend per share is a declared amount.  Assuming a $10 share paying a quarterly dividend of $0.25 your yield is: Now figure that you paid $8.75 for the share. Now the way dividends are allocated to shareholders depends on dates published when the dividend is declared.  The day you purchase the share, the day your transaction clears etc are all vital to being paid a particular dividend.  Here's a link to the SEC with related information: https://www.sec.gov/answers/dividen.htm I suppose it goes without saying but, historical dividend payments should not be your sole evaluation criteria.  Personally, I would be extremely wary of a company paying a 40% dividend ($1 quarterly dividend on a $10 stock), it's very possible that in your example bar corp is a more sound investment. Additionally, this has really nothing to do with P/E (price/earnings) ratios. See this link...I was also looking an answer to the same questions. This site explains with an example  http://www.independent-stock-investing.com/PE-Ratio.html In the context of EDV, 4.46 is the indicated dividend rate. The indicated dividend rate is the rate that would be paid per share throughout the next year, assuming dividends stayed the same as prior payment.  sources: Dividends and interest are counted under operations for the purpose of this tweet. This is pretty much entirely a non-story. I'm not sure exactly how they're dividing it up, but it looks like they're only counting stock appreciation as capital gains and counting things revenue from sales (from their subsidiaries as well) under operating income.   This is just from a quick glance over their statement of earning, but that's what it looks like to me. "The language in the starbucks accounts is highly ambiguous. But Starbucks has no treasury shares which helps work out what is going on.  Where it says ""respectively"" it is referring to the years 2014 and 2013 rather than ""issued and outstanding""...even though it doesn't read that way. Not easy to work out. The figures are:  Authorised 1200 2014 Issued 749.5 2014 Outstanding 749.5 2013 Issued 753.2 2013 Outstanding 753.2" Your analysis is correct.  The income statement from Google states that LinkedIn made $3.4 million in 2010 - the same number you backed into by using the P/E ratio.  As you point out, the company seems overvalued compared to other mature companies.  There are companies, however, that posts losses and still trade on exchanges for years.  How should these companies be valued?  As other posters have pointed out there are many different ways to value a company.  Some investors may be speculating on substantial growth.  Others may be speculating on IPO hype. Amazon did not make a profit until 2003.  Its stock had been around for years before that and even split many times.  If you bought the stock in 1998 and still have it you would be doing quite well. "Dividend rate is ""dividend per share"" over a specified time period, usually a year. So in the first example, if the company paid a $1/share dividend over the year before the stock dividend the shareholder would receive $100, while if it paid the $1/share the year after the stock dividend the shareholder would receive $105. The company could have achieved the same thing by paying total dividends of $1.05/share, which is what the last phrase of the last quoted paragraph is saying. Here's an Investopedia page on dividend rate. Also, what you're calling ""payout ratio"" is really ""dividend yield"". ""Payout ratio"" is how much of the company's net earnings are paid out in dividends. That's all in the US, I could see the terms being used differently outside the US." CHN is a Closed-End Fund. CHN actually pays out three types of distributions: In the case of CHN, they appear to be paying yearly.  The most recent dividend, with exdate of 18 Dec 2014, consisted of $3.4669 of Long-term capital gains and $0.2982 cash dividend. Prior to that, the dividend with exdate of 19 Dec 2013 consisted of $2.8753 long-term capital gains and $0.4387 cash dividend. For a standard dividend yield you typically would not expect short-term and long-term capital events to be included in a yield calculation, as these events really only occur in relation to a fund rebalancing (changing its investments) and are not really due to the actual performance of the fund in any way.  Most free sites that provide dividend information do not make a distinction on the dividend type. Data source: Premium Data Full Disclosure: I am a co-owner of Premium Data/Norgate. "The Dividend Discount Model is based on the concept that the present value of a stock is the sum of all future dividends, discounted back to the present. Since you said: dividends are expected to grow at a constant rate in perpetuity ... the Gordon Growth Model is a simple variant of the DDM, tailored for a firm in ""steady state"" mode, with dividends growing at a rate that can be sustained forever. Consider McCormick (MKC), who's last dividend was 31 cents, or $1.24 annualized. The dividend has been growing just a little over 7% annually. Let's use a discount, or hurdle rate of 10%. MKC closed today at $50.32, for what it's worth. The model is extremely sensitive to inputs. As g approaches r, the stock price rises to infinity. If g > r, stock goes negative. Be conservative with 'g' -- it must be sustainable forever.  The next step up in complexity is the two-stage DDM, where the company is expected to grow at a higher, unsustainable rate in the early years (stage 1), and then settling down to the terminal rate for stage 2. Stage 1 is the present value of dividends during the high growth period. Stage 2 is the Gordon Model, starting at the end of stage 1, and discounting back to the present. Consider Abbott Labs (ABT). The current annual dividend is $1.92, the current dividend growth rate is 12%, and let's say that continues for ten years (n), after which point the growth rate is 5% in perpetuity. Again, the discount rate is 10%. Stage 1 is calculated as follows: Stage 2 is GGM, using not today's dividend, but the 11th year's dividend, since stage 1 covered the first ten years. 'gn' is the terminal growth, 5% in our case. then... The value of the stock today is 21.22 + 51.50 = 72.72 ABT closed today at $56.72, for what it's worth." "Also note that a share of voting stock is a vote at the stockholder's meeting, whether it's dividend or non-dividend. That has value to the company and major stockholders in terms of protecting their own interests, and has value to anyone considering a takeover of the company or who otherwise wants to drive the company's policy. Similarly, if the company is bought out, the share will generally be replaced by shares in whatever the new owning company is. So it really does represent ""a slice of the company"" in several vary practical ways, and thus has fairly well-defined intrinsic value linked to the company's perceived value. If its price drops too low the company becomes more vulnerable to hostile takeover, which means the company itself will often be motivated to buy back shares to protect itself from that threat. One of the questions always asked when making an investment is whether you're looking for growth (are you hoping its intrinsic value will increase) or income (are you hoping it will pay you a premium for owning it). Non-dividend stocks are a pure growth bet. Dividend-paying stocks are typically a mixture of growth and income, at various trade-off points. What's right for you depends on your goals, timeframe, risk tolerance, and what else is already in your portfolio." The P/E ratio is a measure of historic (the previous financial year) earnings against the current share price. If the P/E is high, this means that the market perceives a big increase in future earnings per share.  In other words, the perception is that this is a fast growing company.  Higher earnings may also equate to big increases in dividends and rapid expansion.  On the other hand, if the P/E is low, then there is a perception that either earnings per share are decreasing or that future growth in earnings is negligible.  In other words, low P/E equates to a perception of low future growth and therefore low prospects for future payout increases - possibly even decreases. The market is (rightly) usually willing to pay a premium for fast growing companies. "The way the post is worded, coca cola wouldn't count towards either, although it's not entirely clear. If the dividends are considered under capital gains (which isn't technically an appropriate term) he's earning only 500Million a year from his stake in coca cola. If he sold his shares, he'd receive capital gains of ~15Billion, which would probably outpace his operations business.   The best graph would probably be something like ""net worth of operations vs net worth of equity in other companies""" The stock split, it is similar to what happened to Apple a little while back. When Google split 2 to 1, it means that each share holder got 2 shares for each 1 share they had and each share was 1/2 the price. gnasher729, was able to see my problem here. It was a silly oversight. It's not 50p a share, its 0.5p a share. @Bezzzo: The dividend is not 50p per share, it is 0.50p per share -   half a penny per share. Thanks!