Getting Comfortable with Dividends

I was look­ing up some basic div­i­dend infor­ma­tion on GE and an inter­est­ing thing hap­pened. I noticed that the num­bers on Yahoo! Finance didn’t make sense. I’d like to share my thought process as a way to help you get com­fort­able with div­i­dend math.

Confusing Math

It’s impor­tant to gain a very basic knowl­edge of what the div­i­dend num­bers we’ve been using mean so you can make bet­ter deci­sions & feel empow­ered. You won’t feel empow­ered if you’re con­fused, yet it seems that com­pa­nies pro­vid­ing finan­cial infor­ma­tion go out of their ways to make it con­fus­ing!

A Word on Stock Prices

During mar­ket open it’s nor­mal for the stock price on dif­fer­ent web­sites to vary. Sites like Yahoo! and Google use delayed pric­ing infor­ma­tion, and the delays can vary from site to site, or even at dif­fer­ent times with­in a site. Delayed pric­ing is good enough for research. If you see two dif­fer­ent prices, you should under­stand that it’s because the places you are look­ing have dif­fer­ent delays. This doesn’t real­ly mat­ter to us, but you should know what’s going on.

Dividend Details

Dividend infor­ma­tion can be pre­sent­ed two dif­fer­ent ways, as a quar­ter­ly amount or an annu­al amount. I noticed an error on Yahoo!’s GE chart, so went to Google Finance to have a look. While Yahoo! presents the div­i­dend amount as an annu­al amount, Google presents the quar­ter­ly num­ber. Be care­ful when look­ing at div­i­dend infor­ma­tion and make sure you know which you are look­ing at! There are a cou­ple of ways to tell, but first, the error.

Here’s the GE chart from Yahoo!:

GE Stock Quote (Yahoo!)

Because the num­bers don’t scare me, I always dou­ble check what I see. I cal­cu­lat­ed the yield from Yahoo!‘s num­bers to be 0.68÷21.59 = 3.149% (which rounds off to 3.15%). When I went back to Yahoo! I noticed that it said 3.20%. I can’t explain this, I just know Yahoo! is giv­ing me the wrong infor­ma­tion. So, I went to Google to check what I was see­ing.

Here’s the table from Google Finance:

GE Stock Price Quote

Notice, the div­i­dend and yield infor­ma­tion are on the top right of the chart. Google Finance gives a yield that looks cor­rect, but the div­i­dend is much low­er! It’s low­er, because Google tells us the quar­ter­ly div­i­dend amount, not the annu­al div­i­dend amount.

We can fig­ure this out very quick­ly, if we devel­op the habit of check­ing what we see. If you were to check the yield shown on Google against the stock price based on the div­i­dend shows, you’d come up with 0.17÷21.59 = 0.79%. 0.79% is quite low, and I’d sug­gest if that were the real div­i­dend it’s prob­a­bly a com­pa­ny we shouldn’t use for our blue­print. But, how would you know what the right num­bers are?

Well, know­ing that some­times div­i­dends are pre­sent­ed as quar­ter­ly num­bers, you might mul­ti­ply 0.17×4, get 0.68, and cal­cu­late the yield of 3.15% which then makes sense. In Google’s case, if you hov­er the mouse over the words “Div/yield” it will tell you that it’s show­ing the lat­est quar­ter­ly div­i­dend amount.

There are two oth­er easy alter­na­tives for find­ing out infor­ma­tion about a com­pa­ny.

If you have a bro­ker­age account you can look up detailed infor­ma­tion about com­pa­nies there. Brokerages often dis­play infor­ma­tion more clear­ly than pub­lic sites like Yahoo! and Google. For exam­ple, Fidelity’s div­i­dend infor­ma­tion on GE clear­ly states that we’re look­ing at annu­al­ized num­bers:

GE Dividend Key Stats (Fidelity)

A bro­ker­age account also shows oth­er impor­tant infor­ma­tion that we’d like to know like pay­out ratio and div­i­dend growth rates.

This infor­ma­tion from Fidelity is avail­able even if you don’t login, so you don’t even need an invest­ment account to com­plete this sort of research using their site.

An even sim­pler way to be absolute­ly cer­tain is to head back to the investor rela­tions page on the company’s web­site. Dividend his­to­ry is pre­sent­ed in a chart that shows the pay­ments and dates they were paid. GE’s div­i­dend his­to­ry page shows the fol­low­ing:

GE Dividend History Page

You can clear­ly see that the quar­ter­ly pay­ment is $0.17.

Take Away

It doesn’t mat­ter whether you use quar­ter­ly or annu­al num­bers in the Company Selection Worksheet, as long as you are con­sis­tent when com­par­ing com­pa­nies, and as long as you cal­cu­late the yield as an annu­al num­ber by using the year­ly div­i­dend or mul­ti­ply­ing the quar­ter­ly yield by 4.

Want access to our Dividend Stock Selection Worksheet? It’s Week 7 of our free 10-week Elephant’s Paycheck Blueprint for 401K Rollovers email course. Check it out.

Summary

Let’s sum­ma­rize. We took a look at the stock price, div­i­dend, and div­i­dend yield. We cal­cu­lat­ed the yield, found an error on Yahoo! and then noticed that Google shows the div­i­dend quar­ter­ly while Yahoo! shows it annu­al­ly. It’s impor­tant to ver­i­fy what you see, and that you become com­fort­able enough know­ing what you are read­ing in order to become com­fort­able with the num­bers (and what they mean). Finally, we dou­ble checked what we saw with Fidelity and the company’s investor rela­tions site. Of course, you could have start­ed with the investor rela­tions page. However, learn­ing to use all the dif­fer­ent sites helps you become more flu­ent with div­i­dend math which will serve you well over the long haul.

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