Interest Rates and Time ValueThis is the introduction section for [PRM Exam I](https://financetrain.com/prm/prm-exam-i/).
It pre...
Lessons
- Equity Analysis Part 3 - Introduction
- Free Cash Flow Valuation
- One, Two, and Three Stage FCF Calculations
- Share Price Multiple Methods in Equity Valuation
- Price to Earnings (P/E) Ratio (Leading P/E and Trailing P/E)
- Price to Book (P/B) Value Ratio and Equity Valuation
- Price to Sales (P/S) Ratio
- Price to Cash Flow Ratios
- Enterprise Value (EV) to EBITDA
- Dividend Yield for Valuing Equity
- Residual Income (RI) Valuation Model
Dividend Yield for Valuing Equity
- A classic metric for valuing a stock.
Dividend Yield = Annual Dividend per Share / Price per Share
Trailing Dividend Yield = (Recently quarterly dividend per share × 4) / Price per share
Leading Dividend Yield: Calculated in the same manner, but forecasted future year dividend payments would be used.
Dividend Yield positives:
Payments are a key component of a stock's total return.
Can be expected with greater certainty than stock price appreciation.
Dividend Yield drawbacks:
Dividend yield fails to reflect share price appreciation when evaluating a stock's total return potential.
Dividends paid in the current period reduce a company's capital available to invest in future growth.
The tradeoff between dividends and capital gains can be difficult to evaluate.
Not all companies pay dividends.
Justifiable Dividend Yield breakdown:
Div0/P0 = (rce - Growth rate of dividend payment) / (1 + g)
- The yield has a negative relationship with the dividend growth rate.
- The yield is positively related to the required return on common equity.
You may find these interesting
Nominal Interest Rate and Effective YieldWhen you go to a bank enquiring about the deposit rates, the rates specified by the bank can be expr...
Value at Risk (VaR) of a PortfolioValue-at- Risk (VaR) is a general measure of risk developed to equate risk across products and to ag...
Value at Risk (VaR)### Define the concept of Value-at-Risk (VaR)
Value-at- Risk (VaR) is a general measure of risk dev...
Gap Reports: Measuring Risk to NII and Economic Va...**Measuring Risk to Net Interest Income**
After a bank has stratified the bank’s assets, liabilitie...
Calculating Net Present Value (NPV) and Internal R...### Net Present Value (NPV) Function
The NPV function calculates the present value of a series of c...
Latin America: Growth and value for investors, but...Latin American countries have supported the last financial crisis better than anyone expected consid...
Equity Vs. Debt FinancingChoosing between equity and debt is one of the most common decision made by business managers while ...
Commodity Traders and Future ValueThe traders in commodity markets for different commodities are of two types:
- One who like to le...
Storage, Convenience Yield, and Commodity PricesIn this article, we will understand the concepts of “storage” and “convenience” yield with reference...
Finance Train Premium
Accelerate your finance career with cutting-edge data skills.
Join Finance Train Premium for unlimited access to a growing library of ebooks, projects and code examples covering financial modeling, data analysis, data science, machine learning, algorithmic trading strategies, and more applied to real-world finance scenarios.
I WANT TO JOINJOIN 30,000 DATA PROFESSIONALS
Free Guides - Getting Started with R and Python
Enter your name and email address below and we will email you the guides for R programming and Python.