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3/18/2013

Reader Q&A: How To Discover The Dividend Yield And How To Predict The Future Dividends

I’ve recently received an e-mail with some really valuable questions inside. Below is his mail:


“Dear Tom and Hans,

Thank you for presenting many good articles and information on dividends.  Your information has already helped me make a good pick on NTI.

I have questions about 2 stocks that you mentioned in your articles - VIP and AZN.

For VIP, your article lists a yield of 22.76%, and NASDAQ.COM lists 26%. But MSN.com lists it at 6.6%, Yahoo lists it as $2.72 (22.2%), while Motley Fool lists it as $2.72 (5.5%). I find this quite confusing.
 
Also for AZN, your article lists its yield at 16.73, NASDAQ.com lists 8.29%, MSN.com lists it at 6.1%, Yahoo lists it at $3.80 (8.30%), while Motley Fool lists it as $3.80 (6.1%).

For VIP, form the NASDAQ site, I see that they made 3 payments in 2011, and 2 payments in 2012.  The amounts are not consistent. So it's hard to predict the yield.

For AZN, I see from the NASDAQ site that their last payment was on 2/13/13 in the amount of $1.9.  If I multiply 1.9 by 4 then divide by today's stock price of $46.5, I get a yield of 16.5%, which is close what your article has for AZN.  However, AZN seems to only pay every February, and then make a payment that is about 40% to 50% of that in August of the same year.

I would appreciate it if you can clarify this. Thank you."

These are very good questions and I like to answer them all as good as I can.

First of all, there are hundreds of screeners outside and several deliver different results. It mainly depend on the database they use. If a company pays a special dividend or the shares were split, they have an extraordinary high yield. I personally use the yahoofinance and googlefinance tools for a quick update because they have a good database for international stocks. In addition it could make sense to look at the tools from Bloomberg and Reuters.

VIP – VimpelCom: If you have some doubt about the dividend history and the payment policy, you should go to the investor relation homepage of the company. On the section dividends you can find more information. They say:

“It is the Company’s intention to pay a dividend which develops substantially in line with the development of its operational performance. The Company aims to pay interim and final dividends annually in cash.”

..

“…the Company aims to pay out a significant part of its annual operating free cash flow to its shareholders in the form of dividends. Operating Free cash flow is defined as “Net Cash from Operating Activities minus CapEx”, and can be derived from the consolidated group financial statements. The group aims to pay out at least USD 0.80 per share per year for the period 2012-2014 assuming not more than 1,628 mln common shares are issued and outstanding. The company will plan to pay the annual dividend in two tranches. The first tranche will be an interim dividend paid during the second half of the year. The second tranche will be the final dividend that will be paid out following the annual results announcement.”

I am not in detail with the dividend policy of VIP but it seems more complex on the first view. I would calculate with a maximum dividend of USD 0.80 this year. That’s a yield of 6.67 percent. But for more details, you should contact the investor relation department of VIP. They can tell you more because they are closer to the matter.

AZN – AstraZeneca: Is a British drug company. Normally, British stocks pay two interim dividends a year. But there are also some with quarter dividends. Others are on a switch. The investor relation section of the homepage says:

“Dividends will be paid twice a year, with a greater proportion paid as a second interim.

First interim: announced end of July and paid in September
Second interim: announced end of of January/beginning of February and paid in March”

They will pay USD 1.90 on March 18, 2013. The ex-dividend date was on February 15, 2013. Last year AZN paid an interim dividend of USD 1.95. You can also find more information in the latest full year presentation. The company plans no share repurchases and wants to follow a progressive dividend policy compared to the recent fiscal year (last year dividend was $2.80). I would calculate with a flat dividend of $2.80. That’s a yield of 6%.

In general, when you are in doubt about the future dividends because your target company has no credible dividend history and earnings are very cyclic at high debt levels, do not hesitate to scout for a latest statement by the management team. If there is no statement, you should contact the investor relation department of the company in order to get more details. They will tell you the public statement of the dividend in a very short manner. But be careful they often tell to pay a high dividend because they don’t want to lose investors but they needed to cut dividends because of the business model and capital needs. In the end it’s the view of the investor that matters. He discovers the possibility for a flat dividend, a hike or even a cut.

I hope my view helped you to understand how you should proceed by estimating the next dividends. If not you can leave a comment on my Facebook-Page. I always try my best to help others.

Tom

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