One strategy to use is to not only look at the current dividends but also what the dividends might be in the future. It is measured in this way:
- Take the first quarterly dividend of the current financial or calendar year.
- Multiple that total by four. Let’s say the first dividend for the year is worth 15 cents. You multiply it by four to arrive at 60 cents or $.60.
- Divide the total by the current stock price. Suppose the stock value is $10. Divide.60 (the quarterly dividend times 4) by 10 which equals 0.06. Calculate the percentage by multiplying 0.06 by 100. The forward dividend yield will be 6%. There is a potential for the dividends of the stock to be worth 6% of the value of the stock in the future. If that percentage is high, it might be worthwhile.
You must use all of these measurements to get an idea of how your dividend investments will increase when finding something of value to invest in.
