TIP OF THE WEEK – Why the dividend/earning yield ratio is better than the dividend payout ratio

Why the dividend/earning yield ratio is better than the dividend payout ratio

Jason Brizic

May 13, 2011

Rock solid high dividend stocks earn more than they payout in dividends year after year.  This ratio between earnings per share and dividends per share is commonly known as the dividend payout ratio.  A dividend payout ratio above 100% signals a possible dividend cut (especially the longer it stays above 100%).

The dividend payout ratio is nice but it only shows you the difference between the two numbers being compared.  There is another number that called the earnings yield that can be compared to the dividend yield.  Let’s compare three companies with some similar ratios.  Proctor & Gamble (dividend aristocrat) and Safe Bulkers have similar dividend payout ratios and div yield/earnings yield ratios, but much different dividend yields.  Safe Bulkers and WWE have high dividend yields, but very different ratios.

Proctor & Gamble (PG)

Safe Bulkers (SB)

World Wrestling Ent.(WWE)









Dividend Payout Ratio




Dividend yield




Earnings yield




Div yld./Earning yld.




It should be no surprise that WWE cut its dividend recently and now its dividend yield is in the 4-5% range.

You can use Morningstar.com to quickly find these yields.  Go to www.morningstar.com.  Type your stock ticker into the box at the top.  Then click on the Valuations tab.  Scroll down to the bottom of the page’s contents and you will see the dividend and earnings yields.  It looks like this:


I like to see double digit earnings yields with a slightly smaller dividend yield.  Safe Bulkers (SB) is a beautiful thing.  Click here to be taken right to the page:


For more tips, go here:


Published in: on May 13, 2011 at 4:29 pm  Leave a Comment  

The URI to TrackBack this entry is: https://myhighdividendstocks.wordpress.com/2011/05/13/tip-of-the-week-why-the-dividendearning-yield-ratio-is-better-than-the-dividend-payout-ratio/trackback/

RSS feed for comments on this post.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: