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There are some excellent opportunities to buy high-quality dividend stocks at a discount. 2 Ultra-Cheap Dividend Stocks Paying 6% or More You Need to Take a Closer Look At Skip to main content
To calculate a stock’s dividend yield, take the company’s total expected payout over the course of a year and divide that by the current stock price. The mathematical formula is as follows:
A related approach, known as a discounted cash flow analysis, can be used to calculate the intrinsic value of a stock including both expected future dividends and the expected sale price at the end of the holding period. If the intrinsic value exceeds the stock’s current market price, the stock is an attractive investment. [6]
r is the interest rate or discount rate, which reflects the cost of tying up capital and may also allow for the risk that the payment may not be received in full; [6] n is the time in years before the future cash flow occurs. Where multiple cash flows in multiple time periods are discounted, it is necessary to sum them as follows:
Graham later revised his formula based on the belief that the greatest contributing factor to stock values (and prices) over the past decade had been interest rates. In 1974, he restated it as follows: [4] The Graham formula proposes to calculate a company’s intrinsic value as:
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Suppose a stock costing $100 pays a 4% dividend, grows at a terminal rate of 6.5% and has a discount rate of 7.9%. The price/dividend first estimate of 25 years is easily calculated. If we assume an additional 33% duration to account for the discounted value of future dividend payments, that yields a duration of 33.3 years.
It includes one portfolio with up to 10 holdings as well as a dividend calendar, limited benchmarking and portfolio rebalancing and basic filters, including the top five dividend stocks. The $6.70 ...