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IFB85: Finding Good Dividend Stocks By Using Better Ratios

Announcer:                        00:00                     You’re tuned in to the Investing for Beginners podcast. Finally, step by step premium investment guidance for beginners led by Andrew Sather and Dave Ahern to decode industry jargon, silence crippling confusion, and help you overcome emotions by looking at the numbers, your path to financial freedom starts now.

Dave:                                    00:34                     All right folks. Welcome to the Investing for Beginners podcast. This is episode 85. So tonight Andrew and I are going to talk about dividends, our favorite subject. Andrew over the weekend had some revelations on some thoughts on dividends and some metrics and he’s got some great blog posts that are going to be coming out here shortly that we’ll talk a lot about what we’re going to talk a little touching on tonight. So some of the metrics that we’re going to talk a little bit about. We’re going to be current yield, recent dividend growth, consecutive years of dividend growth and yield on cost. And I’m going to have Andrew go ahead and start us off and he’s going to be kind of the lead guy tonight and I’ll throw in my two cents on occasion when I feel it’s relevant. So Andrew, why don’t you go ahead and take us away.

Andrew:                              01:21                     Alright, I’ll take the wheel. So by the way, by the time this goes live, those posts will be on the blog. So if you go on, they’re going to be a four post series and uh, you can go in depth and really get deep into the weeds so it’s actually useful and you can actually use it when you’re trying to look at dividend stocks. I figure we would talk about some of the ways that people currently trying to find good dividend then stocks. It’s a great primer for beginners and, and there’s some good metrics that we really haven’t touched on much and any of the episodes that we’ve recorded a and stuff you’ll see in financial websites when you’re sifting through dividend stocks, trying to find, you know, the ones that will really drip and do really well give you outsize returns for your portfolio. But you know, some of these metrics also have some things missing with them. And so that’s what all kind of get deeper into.

Andrew:                              02:16                     And we can maybe have a little bit of a thought experiment on how we can make some of these metrics better and, and hopefully give ourselves better results at the very least, be able to take away some misconceptions on different stocks or companies that may look better, appear to be better than they really are. And so there’s a lot of these metrics, other kinds of really popular that a lot of the smart managements know to, you know, prop these numbers up to make everything look good, but maybe you scratch one level under the surface and you find out that it’s not as rosy as they’re trying make it. So if we can just take that analysis to the next step, then we can use these metrics and use them in a better way. Right? So I think first thing, let’s talk about dividend yield. This is very simple. It’s a, you buy a stock and whatever dividend payment you get, that’s going to be the yield. So as an example, if I’m buying a stock for $100, I’m getting $3 dividend, that’s a three percent yield. And so I think yield is something that’s very common throughout a lot of different financial products. You think about savings accounts, money, market accounts, anything that pays an interest and that interest that you’re getting as a yield and that’s something we can all kind of conceptualize recent dividend growth.

Andrew:                              03:49                     This is something that investors like to look at and it makes sense because just in the same way that investors will look at a stock and how it’s been growing, uh, they like to kind of project that into the future, which, you know, may or may not be a bad thing. Uh, there’s always two sides to that coin, right? You can say that an object in motion tends to stay in motion and you do see that with stocks, obviously stocks other have better businesses, will tend to have better pasts and then they can continue that for better futures. The flip side of that is that a past performance does not predict or guarantee future results. And so just because the stocks done really well in the past doesn’t mean that it will do well in the future. So like I said, there’s kind of two ways to, um, to think about that, but um, it’s not completely useless to, to look at a past growth and so you can do that with dividends. I think if you go, I think it’s dividend.com. If you, if you look at the dividend history of any ticker symbol, you’ll see one year, three year, five year and 10 year dividend growth rates.

Andrew:                              05:10                     I think those can be very helpful in trying to estimate maybe how, how much compounding you’ll see if you’re dripping, and as a reminder, dripping means dividend reinvestment. You’re, you’re taking your dividends and you’re buying more shares with them. You’re reinvesting those dividends so you can accumulate more shares and, and grow your wealth in that way. So I think that’s something that can be very useful, very helpful, uh, and something that can help you kind of make decisions if you have a tradeoff, right? You can run this in the spreadsheet. I’ve done it a ton of times being the spreadsheet nerd that I am, but you can take a stock with maybe like a four percent yield. If it only grows at, let’s say three percent a year and you compare it to a stock, maybe the yield was much lower and maybe you were only getting like a one percent yield to start, but if that’s growing at 20 percent a year, it’s not going to take very long for that one to outpace the four percent yield with only three percent growth.

Andrew:                              06:12                     So again, you have to take that one with a grain of salt in the sense that you can just guarantee that because of stocks grown dividend for 20 percent for the past five years, that’s going to do that in the next five years. But it’s a good indicator on exactly how good has management been growing the dividend or not. So I think a easy resource for that is, like I said, Devon and Dotcom has, has those growth rates. I believe they go all the way up to 10 years. Um, so you can look at that. This is a metric I know dividend.com does report and you can see it quite easily. Again, you would just google, the ticker. So if I’m looking at it, let’s say Disney and I would say dividend history, put that in Google dividend dotcoms going to be one of the top, uh, links on there and you click on that one.

Andrew:                              07:10                     That’s what you’ll see how many years they’ve consecutively ground the dividends. This is, should be obvious for us. And maybe Dave can talk about some of the milestones for these dividend growers as a, as it get through the years. But essentially, you know, if you have, this goes back to drip and compounding. If you have a stock that’s growing every single year, well now you have an income stream that’s not only that you’re receiving every year, but it’s growing. So it’s like if you have a river, an income stream that’s flowing into your portfolio like a river, you just imagine that river, why they need, and it’s going to wide in at a, at a very accelerated rate if you’re reinvesting those dividends. And so, you’re going to get higher income streams from the new shares that you own plus, the company growing. So that’s really what makes dividend stocks magical.

Andrew:                              08:06                     If you can find stocks with consecutive years of dividend growth kind of on their mantle as, as, as their own accomplishment, then that can be a good indication of a, of a stock that wants to keep that track record intact, keep that reputation intact and dividend investors really like to see that. And I know, I don’t know. Do you look at certain years that you preference? I don’t really prefer bile obviously. I like to see more as better. Dave, do you have like a, do I preference?

Dave:                                    08:40                     Yeah, yeah. I try to look back on five or five or 10 years and see, see where they are further for growth and kind of what I like to do is I will go back five and 10 years and then of look at a, a range of how they’re doing through those five to 10 years and I like to see it going up obviously. And if I see it over the five year period is going up and maybe over the 10 year period it’s not, then I may try to go back farther and see what that’s what’s going on with that.

Dave:                                    09:16                     This dividend.com. That you referenced. For example, I’m looking at a GLW or Corning, which is a company that I’m invested in right now. Their dividend yield is two point two five and their dividend growth or has been for the last seven years. So it’s not showing me the exact amount for the seven years, but it is showing me that they’ve been growing their dividend for the last seven years, which is nice to see as a company that I’m invested in currently. So it is a great, like Andrew said, it’s a great reference. It’s to look up these numbers and kind of see where they’re going really with dividends. I guess it really Kinda depends on where you’re investing them and you know, obviously there’s the aristocrats and there’s the kings that are going to have the 25 and 50 year dividend growth over those periods of time, which is amazing. And awesome, and if you can find those companies that are undervalued so that you can buy them on sale, then that’s even better. And I guess that’s kind of my thought on that. What are your thoughts?

Andrew:                              10:24                     Yeah. Cool. I think it’s one of those things that you’ll, you’ll see journalists, analysts, people who cover stocks, they’ll, they’ll tend to bring it up whenever it’s relevant for a stock. So

Andrew:                              10:38                     when they talk about, oh AT&T was such a great stock to own over the last four decades. Also say by the way, it also grew its dividends for, for the 50 slash 60 years, however long it was. I know some of my dividend waitresses are so, you know, I know some of my dividend fortresses, our past that kind of cover the 10 years, I think Wednesday when you see like a stock getting to 10 years of consecutive growth, I don’t think there’s a name for it yet, but it gets in this group that a lot of different websites and blogs like to focus on those. So it can be, you know, potential catalysts if you’re buying the stock at seven or eight or nine years and it gets to that 10 year range. Just another good metric to keep in mind and something that I like to look at.

Dave:                                    11:28                     Yeah, exactly. I wanted to throw one thing out there when we’re talking about some of these ratios have to be careful of when you’re looking at a company you’re trying to find the say you’re screening for a company, you’re looking for a company that has a really great dividend yield. I’m going to throw out there one that was unfortunately a big fail for me, which was Gamestop. One of the things that attracted me to them and think a lot of people initially was they had a really, really great dividend yield and in part that was because the stock price was taken a hammering and they weren’t changing their dividend payment. So they’re still paying the same amount out. But as the stock price dropped their dividend yield rows and rows and rows. And that was one of the. As Andrew was referencing the writers when they would talk about Gamestop, but that was one of their selling points was this company has a fantastic dividend yield and they did, I mean at one point I think when I owned the company was up to 10, 11 percent, which is, you know, REIT territory and that’s unsustainable.

Dave:                                    12:35                     And it was really because the company was getting hammered by the stock market and the price was falling and falling and falling, but they weren’t changing their dividend yield. No, that’s obvious. The unsustainable. And I sold out of the stock, you know, about six months ago at a big law. So those, it was a big mistake on my part, but I guess my point being is that you have to be wary of the dividend yield and you have to kind of look and see how that relates to the actual stack stock price and you know, go back a few years and see if that’s something that is sustainable. And B, is it real? And in the circumstance with Gamestop, it wasn’t real. It was, it was a, it was a fake number, not it wasn’t fake, but it was illusionary. It was not real and it was not a great reason to invest in the company because they weren’t raising their dividend yields super, super high and I guess another factor I want to throw out there as the payout ratio and looking at that as a another metric that you can kind of keep in mind when you’re investing in a company based on our dividend you’re looking at, you want to find a company that’s going to have a moderate payout ratio because that means they’re not taking all their money and giving it back to you in a dividend and they’re using it either to reinvest in the company or having it as cash to sit on or using it to pay down their debt.

Dave:                                    13:59                     You know, something else that’s going to help improve the company. If they’re giving it all back to you, then at some point they may have to change that, which is obviously a bad thing as well. So just a couple of things to Kinda keep in mind when you’re looking at this whole dividend picture.

Andrew:                              14:15                     Yeah, I love it. I’m glad you mentioned the payout ratio because that’s huge for somebody who’s like green and maybe it doesn’t know much about. They don’t even know what you mean when you say payout ratio. Can you define that real quick?

Dave:                                    14:29                     You’re basically taking your, taking the dividend that’s being paid out and you kind of compare that to their earnings per share and that’s Kinda how you calculate that and depending on the company and there are a few factors that you have to kind of keep in mind. So one is going to be the age of the company.

Dave:                                    14:48                     So for example, let’s take Coca Cola. Coca Cola has been around for about 10,000 years. Maybe not quite that long, but it’s been around for awhile and they would definitely fall into the category of mature company and they’re not really growing per se. And they’re certainly not growing. Like, let’s say apple would be, for example, or a Facebook, maybe not Facebook right now. This maybe not the best example, but uh, they’re not necessarily growing. So when you compare their dividend ratio to the earnings per share, it’s going to be quite high. It’s probably, I’m just going to guess it’s going to be in [inaudible] 75 to 85 percent range and that’s okay for them because again, they’re in a different stage of life than a company that’s been around 10, 15 years. So you take somebody like corning for example though, the company’s been around for quite some time, but they’ve really only had maybe the last 10 years or so.

Dave:                                    15:45                     They’ve really started to kind of come into their own, so to speak. And their payout ratio is a little over is 41 percent and that is a great number to look at. You wouldn’t want to see a company that’s a younger company, let’s say. I don’t know, I’m trying to think of somebody that would be younger that I could throw out there as well. Those take Facebook. If Facebook was paying a dividend and their payout ratio is 75, 85 percent, that would make me very nervous because that means that they’re taking all their money and they’re giving it back to us, which in the short term that sounds like a great thing, but it’s not so much because again, the company needs, they need cash and when you’re a younger company you have debt to pay off, you have growth, you’re trying to stimulate and when you’re using the dividend to pay all that out and if you want to grow then you gotta figure out another way to do it, whether it’s taking on more debt, which we don’t want to see or they’re going to have to cut the dividend to buy another company or something like that.

Dave:                                    16:48                     And you don’t want to see that either. So those are, I guess simply some quick, easy things to look at as depending on where the stage of the company is in their growth cycle, I guess.

Andrew:                              17:01                     Yeah, that’s perfect. And I think the important distinction to make there is not growth as an age. Uh, and that’s more growth of the industry growth of the market. So I think it’s fair to say a company like Coca Cola a pretty much everybody already knows about, so the uh, unless you want to go maybe underground and start selling. So those people, I don’t think there’s much more that the market can grow from there. No a company like Corning who’s a, like a classic picks and shovels company. They’re a supplying glass for lots of different uses like TV monitors, a computer screens, cell phone screens, windshields, cars.

Andrew:                              17:50                     Because of everything with technology, I think there’s a lot of room for that market to still grow with all the touchscreen mania and the whole smart house thing where everywhere you look you’re going to have a class, some sort of device, right. So, I think that would be kind of a way to look at the difference and you can kind of see from the way the growth numbers are looking from within that industry itself. So I’m sure, I don’t know the exact numbers. You may have the guests on the parish and you’re right, a previous core there, like 88 percent, but I’m guessing the beverage industry probably lower growth compared to some of the other ones, particularly like social media or tech. So parish, a good one to look at. And I was going to ask, do you have like a rain, like you mentioned you tried to get it somewhere reasonable. This is something where I’ve never seen someone come out and say definitively that this is the range you need to be in. I think we all have our preferences. Do you have a range that you prefer?

Dave:                                    18:58                     I prefer, again, depending on where the company is in their growth cycle, I probably prefer an under 50 percent. Okay. That’s kind of what I shoot. That’s, that’s Kinda what I was used for. Um, just because I want them to still have money to do stuff, you know, if they tie it all up, I’d given it to me then I feel like that it could impair the company five, 10 years down the road and I would rather see the company pay me a dividend within reason because again, we’re looking for capital allocators, we’re looking for people to take that free cash flow and figure out what they’re going to do with it, what’s going to be the best interest of the company and us as a shareholder and giving me a huge dividend while it helps me fatten up my paycheck and my book.

Dave:                                    19:52                     It doesn’t necessarily help me with a long term growth of the company because when I buy into company a, I want them to be an investment. I can be in for the next 40, 50 years. You know, like Buffet’s been able to be with Coca Cola, with AMEX, with Wells Fargo. You know, being involved with those companies for a really long time has helped make him, you know, a gazillionaire. And that’s what I want and I don’t want them to give me all their money now I want them to give me the money over the next 40 years.

Andrew:                              20:24                     Yeah, that dividend growth is key because like we said, this kind of goes to the last one to talk about. That’s just a basic one that’s generally used. It’s called Yolo on cost. And basically, when you have a stock that you’ve picked and their dividends growing every year while you just make that one time initial investment and now you have an income stream that’s growing. So that yield on cost is basically measuring how much you paid for the stock and then how much you’re receiving in dividends, say five, 10 years down the line. So let’s go back to that example, right? We have $100 stock. It’s paying us a $3 dividend. And just to make things simple, let’s say, um, it’s been 10 years and the, and the yields now 12 percent, right? It’s paying us $12 now because every year the company slowly grind their dividends.

Andrew:                              21:15                     So because we paid a a $100 and the yield we’re getting now is $12, now that’s a 12 percent yield on cost and so you’ll, you’ll see that grow as, as a company grows or dividends and that’s nice because you’re just getting higher and higher yields as the years go on and you didn’t have to do anything. All you have to do is just purchase, sit and wait and the company is going to do the work and they’re going to do the compounding for you and you just let those paychecks come on in. So I think that’s really the beauty of investing longterm investing, buy and hold a. that’s really where the magic is. And that’s why I think dividend, just talking about dividends, trying to find good dividends. I think that’s why it’s so crucial and why I only buy dividend paying stocks because it really can only take, you know, a couple good dividend investments that could power the returns for the rest of your portfolio and for the rest of your life. Especially if you’re making significant investments and seeing these income streams that really, really grow. And really become something substantial.

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Andrew:                              22:30                     So these are all metrics that, Wall Street kind of generally use is the everyday average joe investor generally uses without a risking losing, I guess some of them people who are more beginners, I want them maybe dissect these a little bit further and talk about how can we improve them and make them better.

Andrew:                              22:57                     So I think, you know, we mentioned dividend growth and so I think there’s a danger and getting fixated on, on that growth. So we need to temporary and we need to scale it back. We need to put some checks and balances into it. So, you know, if I have a stock and you know, on the surface everything is going to look right. And Trust me, whenever I get these emails, these alerts, these news alerts from the stocks I own and they tell me when, uh, that dividend gets raised. And every single time I see a higher res, you know, if it’s up 11 percent from last quarter, I’m stoked. I’m happy.

Andrew:                              23:33                     And that’s just that initial kind of buzz I feel. I feel really great about my dividends going up. The problem is, um, if a company’s not growing their business, their dividend payment on the surface, everything could look a okay. But, basically it’s, it’s a charade and it’s not something that’s going to last forever. If you’ve, if we, we talked about payout ratio and how you’re taking a part of your earnings and you’re paying it out and the dividend. And then the other part, maybe you’re reinvesting in the business. Maybe you’re paying off debt, maybe you’re trying to grow the business with this. If you have a dividend payment that’s growing and growing and growing, that payout ratio is grind and grind and grind where you can’t exceed 100 percent at some point. If the dividend payment goes up faster than the earnings go up, you’re gonna run out of earnings to distribute.

Andrew:                              24:22                     And so at some point you’re going to have to cut the dividend and that’s going to be painful. It’s very painful because investors don’t like to see that. We talked about consecutive years of dividend growth and how much weight is really put on those things. And so once a company builds that, if they ever have to cut the dividend, you will see their share price almost guaranteed. You’ll see that share price really, really crashed down pretty drastically, uh, particularly if the stock has a reputation for being a dividend payer and having a lot of investors who are relying on that dividends for income. So the thing that I kind of proposed in the forepart part blog post series as a metric to take dividend growth to the next step. And so basically instead of just looking at dividend growth, if we also look at earnings per share growth and that to equity growth, make sure that, you know, if they’re on par with each other.

Andrew:                              25:25                     So we want the dividend growth and the EPS growth to at least be close to the same. That’s going to be the ideal situation. Again, if the dividend growth is growing faster than the earnings growth, at some point that’s going to have to pare down. So either the dividend will grow more slowly or it’s going to have to stop growing at all. So we want to make sure we’re, we’re thinking about that when we, when we examined a stock and how they’ve done with their dividend growth. And then the other aspect that I think doing the investors should look at is the debt to equity ratio. You know, I’ve talked about this several times in previous episodes about how the debt to equity ratio can be a great metric to tell us how risky a company is and how, companies that have gone bankrupt.

Andrew:                              26:17                     A high debt to equity ratio is one of those major factors that can lead to bankruptcy. And it just makes sense in the same way that somebody who has a lot of debt in real life is at risk for bankruptcy or at, you know, at risk of missing their payments being late with their payments because they have so many payments to keep up with is the exact same thing in the stock market. What do you think happens if a company has to choose between making a payment, you know, to go into default or paying out their dividend, they’re gonna cut that dividend if the debt payments are too high. So at the same time, you know, if you have high earnings growth, do you have high dividend growth, but you also have high debt to equity growth. What you have is a lot of debt and a lot of interest payments accumulating. And so what you have is you don’t have real business growth. You have growth that’s fueled by leverage and that can last for awhile. But again, it can’t. You can’t grow leverage indefinitely. At some point you have to stop borrowing. And so in the same way that high dividend growth without the earnings per share growth is unsustainable, high debt to equity growth, two highest scale is also unsustainable.

Andrew:                              27:30                     So I basically just, that was like the first metric I presented. It’s just let’s take the dividend growth, but let’s, let’s penalize it, subtract the, the earnings per share, subtract any debt to equity growth that will give us a more complete picture of what, what was the actual business growth and dividend growth. So that’s Kinda the first thing I think that investors should look at when, when they’re taking these basic metrics into account. The second thing I think this isn’t talked about hardly at all is I’m like special dividends. I guess one of those things when I see an announcement for a special dividend on the stock I own, they get really happy and anybody should, right? It’s, it’s free money. Basically, you know, your regular dividends, they tend to be paid out quarterly, four times a year. Some stocks will do it biannually two times a year. A special dividend is one where we’re management says, look, we got, you can think of it as like a profit sharing thing where maybe they had a really great year and they just want to reward, give some of that money back to shareholders. So we have a special dividend, which is just a dividend that’s in addition to the regular, uh, schedule dividends.

Andrew:                              28:42                     Sometimes, you know, the, the management could also look and say, well, you know, as far as growing our business or reinvesting in another business venture that money, sure we could reinvest it, but it wouldn’t be as efficient as maybe giving it back to shareholders and letting them and uh, take that money and compound it for themselves. So that’s another reason why they might pay a special dividend. So I think there aren’t really any metrics for basically like rewarding managements who are, who are thinking of shareholders in this way.

Andrew:                              29:18                     You have to think, if you are in the management shoes and you had all this extra money, when you think your, your financial incentive, your bonus, your own personal bonuses are tied to how high the stock price goes up because special dividends aren’t really given that much attention. Not that I have observed anyways. Um, you would think, you know, even if I as a capital allocator, maybe I’m going to take this money instead of giving it back to shareholders, I’m going to invest in this, this project that’s maybe not as profitable. You know, maybe the only returns me three percent return on my equity. But Hey, it’s still going to grow my bottom line. A lot of managements can and a lot of instruments do do that. But I think if, if we get to a point where maybe as shareholders and investors were taking into account and really a rewarding the managements who give enough money back to the shareholders, like they should, I think, uh, that could maybe incentivize more management to do the same.

Andrew:                              30:23                     So the only thing I’ve seen on on Wall Street is certain companies will get a reputation for doing special dividends, like Costco’s a, an example where they’ve done a special dividends so often that it’s almost like regularly scheduled. So you know, that’s obviously a benefit to the special dividend, but a lot of times there’ll be companies that just kind of pay as as they see it fit. So we need to, when we’re thinking about how, how is this stock and how is it doing for me and is it giving me the type of dividend income I need, I think we need to take that into account and we need to really take the, take the evaluation of the business underneath the stock a step further. You could. Sure, I mean you could look at a stocks yield. What’s the yield, what’s the yield on cost? How much have I personally received in dividends and how much has that grown over time.

Andrew:                              31:23                     You can do that. But like Dave was saying earlier, sometimes dividend yields go higher just simply because Wall Street hates the company and, and makes the stock price go down. So, you know, it’s not fair to evaluate management or let’s say you have two businesses, you have, um, an ice cream business and like a airplane business, right? It’s not fair to, to like the airplane business more just because it gave you a higher yield when, when you first made the investment, you know, maybe the ice cream business is actually the one doing better things with the capital and maybe over the longterm they’ll do better. So this is something maybe to keep in mind to help you with decision making is to, instead of looking at your personal income streams, look at how the business is doing because you can’t rely on, on how the market’s going to move.

Andrew:                              32:14                     What’s maybe more reliable is how a management has historically managed a company and how that business has historically performed and how likely it is to continue. So to kind of wrap all of that up and to combine it and um, easy metric that we can use. I think we, we take the payout ratio and we just, um, instead of just looking, because the common payout ratio is as they, they usually just look at one year and they’ll, you know, I do this to just kind of, when I’m checking in with a quick glance, I mean, we did that with Coca Cola a second ago. You just take one year of dividend payments, one year of earnings and that’s the payout ratio. But, you know, earnings fluctuate so much over a 10 year period. Most stocks will see their earnings go up and down, and the much higher kind of rate of volatility than the dividend payment.

Andrew:                              33:11                     So that payment ratio could really fluctuate a lot and not give you a complete picture. So I think we need to look at power ratios over a span of five to 10 years. I picked 10 years because I like that. Um, and I think when you’re looking, when you’re trying to calculate the power ratio, make sure you’re including special dividends on top of the regular dividends. And so all you have to do is you just add up all the regular dividends, all the special dividends over a 10 year period, and then you do the same for the earnings per share over that 10 year period. And that once you divide the dividend, my, any divided by the earnings per share, that’s going to give you a more accurate payout ratio over the longterm. So I called that the 10 year true payout ratio. So those are just the two metrics I think that can take standard dividend metrics and, and, and take them to the next level.

Andrew:                              34:03                     So I think if you can combine these two metrics, I don’t have the computer resources or the time really to, to make like a screen for this, but I think somebody could take this idea and run with it. But if you can find businesses that have a good balance of both, you know, somewhere with the true payout ratio and a range, you like to see it. So if like, like Dave said, if you’re looking at a stock that’s maybe in the growth stage, maybe you want some closer to the 25 to 50 percent, maybe if you’re a little bit more conservative, you’d like to get dividend income payments. You’re looking at maybe something more 50 to 75, I think just stocks that kind of stay away from the extremes, a maybe anywhere between 25 to 75 percent. I think that’s a good barometer for a good payout ratio.

Andrew:                              34:58                     Stocks that are probably giving you enough dividend income back for your investment while also reinvesting it back in the business and that can be a good indication. And then if you have that first metric I was talking about with dividend growth, EPS and equity growth, I called that business base dividend growth. And if, if a stock has that plus a healthy payout ratio, true payout ratio, and then obviously they’re doing a good job at allocating capital because they’re growing the dividend health at a rate that you like to see. They’re also growing the business alongside of that. So it’s not making that dividend payment, uh, not lowering that figure for this metric. So if you can find, maybe I’m both of those together, um, I think it can set you up for really kind of identifying the stocks that have historically done well from a business perspective.

Andrew:                              36:02                     They’ve grown the business, they’ve returned capital to shareholders and that can kind of give you insight more so than like a dividend yield can or a share of stock price chart can. I think it’s, it’s something that people can definitely use and something that I’m starting to look at it. I mean I looked at my dividend fortresses that I hold in the. I reviewed those and I was Kinda surprised because um, I had a stock that pay a special dividend and I thought, wow, this, this company is so generous. They’re giving me so much back. But when I did a 10 year true payout ratios, like that’s funny. Uh, it’s really low. I think it was like 16 or 20 percent and that compared to another dividend, a fortress I own where they never gave me a special dividend, but they are just consistently giving me regular dividend payments and it turns out their power ratio is like a 50 percent over 10 years and so that Kinda gives me a better clarity on, on the stocks that I own and I’m like, okay, now I get it, you know, they’re giving me this much in earnings, this is how much this company has given me.

Andrew:                              37:10                     And then you can, you can also take that and look at the growth rates like we discussed and I think you can really get a better picture, make better buying decisions, make better sell decisions, and hopefully optimize their portfolio for the best dividend payments, the best dividend increases, and the best compound interest you can have for your money.

Dave:                                    37:33                     All right folks will. That is going to wrap up our discussion for this evening. I hope you enjoyed our all dividend all the time. A conversation and we talked a little bit about some of the metrics and I think Andrew made a great analysis of the two metrics that he came up with and I thought they were both awesome and that was really cool and I enjoy his in depth discussion of those and I felt like I understood them so that was really good to eat and I’m going to actually try to use those myself. So without any further ado, I’m going to go ahead and sign us off. You guys have a great week? Enjoy your time together and without any further ado, go out there and invest with a margin of safety. Emphasis on the safety and we’ll talk to you guys next week.

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