2. Dividend Yield: This is the ratio of a company’s annual dividend
per share to its share price. A high yield (2%-5%) is better than
a low yield, though one that’s too high (5% or more) should be
viewed skeptically, as yield and risk are positively correlated.
3.74%
3.00%
0%
1%
2%
3%
4%
Altria Group Reynolds American
DividendYield
Altria Group
3. Dividend Growth: Ideally, investors want to buy into growing
streams of dividends. A popular way to predict if a company will
oblige is to look at its dividend history -- specifically, how much
and how often it has boosted its payout in the past.
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
Current20132011200920072005
AnnualDividend
Altria Group Reynolds American
Reynolds American
4. Dividend Payout Ratio: This shows how much of a company’s
net income it pays out via dividends. A high payout ratio isn’t
bad per se, but it does limit dividend growth. Thus, for our
purposes, a lower ratio is preferable to a higher ratio.
78%
Altria Group
46%
Reynolds American
Reynolds American
5. Tallying the score: When all three of these dividend metrics are
considered together, the winner is:
This analysis shouldn’t be interpreted as the
final word on either of these stocks, but rather
as a starting point for further analysis.
Dividend Yield
Dividend Growth
Dividend Payout Ratio
Metric Best Stock
Altria Group
Reynolds American
Reynolds American
Reynolds American
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