The AI (ChatGPT) Dividend Handbook: Important Dividend Ratios

Here is the response from ChatGPT for the prompt important dividend ratios entered on March 21, 2023.

Dividend ratios are financial metrics used to evaluate a company's dividend policy and its ability to pay dividends. Some of the important dividend ratios are:

1. Dividend yield: This ratio shows the percentage of a company's stock price that is paid out as dividends over a period of time. It is calculated as annual dividends per share divided by the current market price per share.

2. Payout ratio: This ratio indicates the percentage of earnings that a company pays out as dividends. It is calculated as dividends per share divided by earnings per share.

3. Dividend coverage ratio: This ratio shows a company's ability to pay its dividends from its earnings. It is calculated as earnings per share divided by dividends per share.

4. Dividend payout growth rate: This ratio measures the rate at which a company's dividend payments are growing over time. It is calculated as the percentage change in dividend payments over a period of time.

5. Dividend sustainability ratio: This ratio indicates a company's ability to maintain its current dividend payouts over the long term. It is calculated as free cash flow per share divided by dividends per share.

These ratios are important for investors to assess a company's financial health, dividend policy, and potential for future dividend growth.