Forum Archive Index - December 1999

[Michael Sprott <MSPROTT@clear.co.nz>]

Hi Paul,

There is no relationship between PER and dividend yield. Dividend yield is
the total annual dividend payment to shareholders divided by the current
market price of a stock. Think of it as the cash return that a shareholder
receives in return for the stock but based on today's share price. For
example, if Company X announces dividends in the last financial year of 3c
and that companies current share price is 72c then the dividend yield for
that company would be 4.16%. Many stocks do not issue dividends rather
investing their profits back into the company and so there is no published
div yields for these companies. Obviously the div yield will alter through
the year as a company's share price fluctuates.

I hope this helps.

Regards

> -----Original Message-----
> From: Paul Jackson [SMTP:j+pjackson@xtra.co.nz]
> Sent: Wednesday, December 15, 1999 12:13 PM
> To:   sharechat@sharechat.co.nz
> Subject:      RE: [sharechat] Newbie Question
> 
> Thanks for that Michael.
>  
> Perhaps you could just clear up one more question I have about this. If
> you say:
>  
> 
> The PER or price earnings ratio is calculated by dividing the current
> market
> price by the companies earnings per share. Earnings per share can
> becalculated a 
> number of ways but is usually the net profit after tax dividedby the
> average 
> number of shares on issue.The PER is a useful indicator of the value of a 
> company asit shows theamount of time (in years) for an investor to cover
> the 
> purchase price of hisinvestment from net profits.Last financial year end
> figures 
> are used to calculate these ratios againstthe current share price.
>  
> What is the relationship between PE & dividend yield? On the above example
> should the  PE be 10 where the dividend yield is 10%?
>  
> Cheers
> Paul
>  
>  

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