Dividend and yield questions?

[BallzDeep]

I'm now looking for stocks that pay a quarterly dividend and a dividend yield but I'm trying to understand how they work. Is a quarterly dividend the amount of the dividend, ie. .5 x the amount of shares you own, say 1000, for a quarterly dividend of 500$?

Also, is the dividend yield a yearly intersest rate paid on top of the QD, ie., if you have 100g's in a stock with a 10% yield, do you get 10g's in interest yearly on top of the QD, is the DYield based on your initial investment.

How often do they get lowered or raised by the company and do they give notice, any detailed info is appreciated.

There are some companies that pay both but I'm concerned how often they get cut in half, although I know it's impossible to tell.

 

[W3bster]

I'm not a dividend person myself yet but this might help.

Is a quarterly dividend the amount of the dividend, ie. .5 x the amount of shares you own, say 1000, for a quarterly dividend of 500$?

Yes.

Also, is the dividend yield a yearly intersest rate paid on top of the QD, ie., if you have 100g's in a stock with a 10% yield, do you get 10g's in interest yearly on top of the QD, is the DYield based on your initial investment.

No, it is an annualized representation of the dividend based on the price per share at a point in time. With the currently decimated prices--the yield is effectively higher--you are paying less for the same distribution per share. Though with the current climate the risk of dividend suspensions/reductions may be increased and the share market price very quickly impaired (for the short to midterm?).

How often do they get lowered or raised by the company and do they give notice, any detailed info is appreciated.

There are some companies that pay both but I'm concerned how often they get cut in half, although I know it's impossible to tell.

Damned if I know. Check SEDAR/EDGAR filings and/or the company website for any sort of news or guidance on that. I would run through the Investor section of the company you are interested in and see their dividend history (it is usually in a simple historical table).

 

[JohnLarue]

I'm now looking for stocks that pay a quarterly dividend and a dividend yield but I'm trying to understand how they work. Is a quarterly dividend the amount of the dividend, ie. .5 x the amount of shares you own, say 1000, for a quarterly dividend of 500$?

Also, is the dividend yield a yearly intersest rate paid on top of the QD, ie., if you have 100g's in a stock with a 10% yield, do you get 10g's in interest yearly on top of the QD, is the DYield based on your initial investment.

How often do they get lowered or raised by the company and do they give notice, any detailed info is appreciated.

There are some companies that pay both but I'm concerned how often they get cut in half, although I know it's impossible to tell.

The dividend and the dividend yield refer to the one quarterly payment you receive. If the dividend is say $2.00/ share you will get 2.00/4 = 0.50 every quarter the company declares a dividend.
If you pay say $40 a share to purchase the stock the annual yield you get is $2.00 / $40 = 5%.
When they quote a stock as having a yield of X% it is the dividend divided by the current market price.

There is not an additional interest payment on common stock
The company's management is under no legal obligation to declare a dividend every quarter & if they run short of cash they have the discretion not to declare or can cut the $ amount paid as a dividend.
Stocks that have their dividend cut will be severely punished and you can expect a big decrease in the market price.

FYI
Some stocks with very large dividend yields i.e > 10%, have that high a yield as the market expects a cut in the payout in the near future. The price has dropped making the last dividend payment yield artificially high

FYI 2
You are expected to pay tax on any dividend income, however for Canadian stocks you receive a dividend tax credit so it is taxed at a lower rate than interest income

 

[BallzDeep]

Very good responses, much appreciated, I also read where a high dividend yield can be a cause for concern, you guys seem to have confirmed that.

 

[squash500]

Very good responses, much appreciated, I also read where a high dividend yield can be a cause for concern, you guys seem to have confirmed that.

A high dividend yield can be a huge concern on securities such as income trusts . For example, Canadian Oil sands trust (cos.un) recently dropped their dividend yield by over 40%!

 

[Mencken]

Also, the income trusts (they have a .UN after their share name) are somewhat different than true dividends - they are "distributions" and do not qualify for the dividend tax credit. Hence the market generally drives their yield higher (by driving the unit prices lower). And also...by the end of 2011 most will all be converted back to normal corporations (more or less - at least the end of the distributions as we know them now) and this is another reason that the market is driving down their share (unit) values, thus effectively causing them to have higher yields.