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Hi,
Could someone help to explain couple of questions please:
1) At page 7 chapter 1 open tuition lecture, example 8. when they talk about dividend yield and dividend payout, does it mean the same thing?
2) are dividend yeild, cover and pay out linked to each other and if yes then could you explain how please.Thank you.
Hi,
1) No, they’re different. The yield is the relative return that you get for each $1 of investment. The payout is the percentage of the profits that are paid out as dividends.
2) I’d try not to link them together as it will only cause confusion but the yield will change if you pay out a larger dividend. This larger dividend will have come from a higher payout ratio, as you’re paying out more of your profit, and this can then cause the dividend cover to fall if the profits have not increased enough to cover the higher dividend.
Thanks
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