Dividend Yield or Total Yield?

By: ispeculatornew
Date posted: 05.18.2012 (5:00 am) | Write a Comment  (2 Comments)

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I saw an interesting post regarding research done by UBS analyst Jonathan Golub. In theory, companies that are able to save enough cash with no significant investment opportunities are faced with a choice. They can either keep hoarding cash or end up paying back investors as Apple (AAPL) has finally decided to go ahead and do.

Paying Back Shareholders

In theory some investors prefer being paid back through dividends while others prefer other forms. Why? It could be because they do not want to receive income right now (and owe taxes). What alternatives exist? Stock buybacks. The company buys back part of its shares in the market, making the number of shares that share the earnings smaller, and thus earnings per share increase. It is also seen as a positive because it sends out a message that the company believes its shares are cheap and should be bought at this price.

Dividends = Buybacks?

If we would agree that both methods are ways for a company to return cash to its shareholders, one generating dividend/income taxes while the other results in an increased share price and thus future capital gains, then it could make sense to consider both when looking for quality stocks. That is exactly what the research did.

Total Yield

The following chart, presented in the Clusterstock post, presents the top names in terms of total yield, you can take a look here:

First take a look at these dividend stocks from a dividend only perspective.

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Then, take a look at their total yields:

I wouldn’t say that I’ll start using this data to invest, and it’s a challenge to get such data, but it was certainly an interesting read right?

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2 Comments

  1. Comment by Ken — May 18, 2012 @ 6:24 pm

    Could you please define Buyback Yield?

  2. Comment by IS — May 19, 2012 @ 9:14 am

    @Ken – I would assume that if the company announces a buyback of $3B, you would divide that by the number of shares and then by the share price and that would be your number, I might be wrong though.

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