What I like about dividend yield testing is that you are using current amounts, not the latest quarterly amounts and not any estimates. It uses the latest stock price and what the stock is currently paying in dividends. The current yield is compared against the historical median dividend yield. It works best on dividend growth stocks.
The dividend increases for a company generally reflect how the management of the company feel about the future and the future earnings of a company. Dividend increases show that the management is positive about the future. Dividend cuts and suspensions, of course, show the opposite. It shows that the management is uncertain about the future or see problems in the short term.
This testing does not work well on old income trust companies that changed to corporations. This is because income trusts payout higher yields than corporations. It does not work well also on companies that have cut their dividends, especially if the dividend cut was big and recent.
On my other blog I wrote yesterday about WSP Global Inc. (TSX-WSP, OTC-WSPOF) ... learn more. Tomorrow, I will write about Thomson Reuters Corp. (TSX-TRI, NYSE-TRI) ... learn more on Wednesday, May 1, 2019 around 5 pm.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.
See my site for an index to these blog entries and for stocks followed. I have three blogs. The first talks only about specific stocks and is called Investment Talk. The second one contains information on mostly investing and is called Investing Economics Mostly. My last blog is for my book reviews and it is called Non-Fiction Mostly. Follow me on Twitter.
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