Dividends

The Dividends section shows a company's dividend history, yield, payout safety, growth rate, and a dividend-only value estimate. This page explains what the section shows, how to read each figure, and how the growth rate and the dividend-based value are computed. The section is available to Free, Pro Lite, and Pro accounts.

Before you begin

What it shows

A bar chart of dividend payments over the selected period.
Dividend metrics: Yield, annual dividend per share, Payout Ratio, Payout Safety (0 to 100), Frequency, and Pay Months.
Growth: the three-year and five-year dividend-per-share compound annual growth rate.
An "Est. of Dividend-Based Valuation" using the Gordon Growth Model, shown separately from the main Fair Value.

Inputs

Period: 1Y, 3Y, 5Y, or 10Y. The default is 5Y.

Outputs and how to read them

Yield: the annual dividend as a percent of price. A higher yield means more income per dollar invested, but an unusually high yield can signal risk.
Payout Ratio: the share of earnings paid out as dividends. Very high ratios can pressure future payments.
Payout Safety: a 0 to 100 sub-score of how comfortably the dividend is covered; higher is safer.
Three-year and five-year growth: how fast the dividend per share has grown; green when positive, red when negative.
GGM Est.: a value implied purely by dividends and their growth. It is a sanity check, not the headline Fair Value.

How it is calculated

Two figures are computed here: the dividend growth rate and the Gordon Growth Model estimate.

Dividend growth rate

The growth rate is the steady annual rate the dividend per share would need to get from its level several years ago to today.

CAGR = (dividend now / dividend n years ago) ^ (1 / n) − 1

In this formula, dividend now is the trailing annual dividend per share in US dollars, dividend n years ago is the annual dividend that many years earlier, and n is 3 or 5 years. The result is shown as a percent. For example, a dividend that grew from 1.00 to 1.34 over 5 years gives (1.34 over 1.00) to the power of (1 over 5) minus 1, which is 6.0% per year. A special or cut dividend can distort the endpoints, and a single year's anomaly skews the rate.

Gordon Growth Model estimate

The Gordon Growth Model values the stock as the present value of a dividend that grows forever at a steady rate.

value = next-year dividend / (required return − growth rate)

Here next-year dividend is the current annual dividend grown one year, in US dollars, required return is the investor's required return (the cost of equity), and growth rate is the assumed perpetual dividend growth, both as decimals. For example, a next-year dividend of 2.12, a required return of 8%, and growth of 4% give 2.12 divided by (0.08 minus 0.04), which is 53. The model is extremely sensitive when growth approaches the required return, and it is only meaningful for stable dividend payers, which is why GNG Research shows it separately and skips dividend-based value when the yield is under 1%.

Data and timing

Split-adjusted dividend history and the yield and payout metrics come from AlphaVantage, refreshed daily.

Use cases

Vet an income stock's reliability.
Compare yield and dividend growth across candidates.
Check whether the payout looks sustainable.

Limitations and disclosures

The Gordon Growth Model is an estimate that is highly sensitive when growth approaches the required return, and it suits stable payers only. The growth rate can be skewed by a single anomalous year. The GGM tooltip notes that the value is an estimate.