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1.
Given a quarterly dividend of $0.30 per share and a $27 stock price, what is the yield?
4.4%. Okay, we threw you a little bit of a curveball with that one. To obtain yield, we want to use the indicated (annualized) dividend rate. A $0.30 quarterly dividend should be multiplied by four before dividing by the stock price.
2.
What is one thing that excess earnings would not pay for?
Dividends. Excess earnings don't exist until after dividends have been paid out.
3.
How do buybacks boost EPS growth?
By decreasing the number of shares outstanding. EPS grows not only when the numerator (profit) expands, but also when the denominator (shares outstanding) shrinks.
4.
What might put a dividend in jeopardy?
Excess debt. Manageable debt levels and steady free cash flows are important factors that help ensure a steady or increasing dividend.
5.
Based on historical information, what might you expect a fair return to be for an established, dividend-paying stock?
Between 8% and 12%. Most established, dividend-paying companies would fall in a range between 8% and 12%.
