Secure Your Future

Dividend Yield

When considering which company’s shares to buy or sell in the capital market, it is a good idea for you to check out for dividend yield as it tells you the percentage of the company’s share price paid annually as dividend. If a company is seen to pay out dividends at a higher percentage of its share price, it means the company is offering a greater return for its shareholders investments and you may consider buying. However, it is advisable when making this decision to track the company’s dividend paying record if it has been consistent in dividend payment or not as this will make you know the company’s financial strength to continue paying dividends well in the future.

Profit margin

This is a key ratio used in checking the financial health of a business. It shows how profitable a company is in converting money earned from sales of products (called revenue) into profit. For companies to make revenue, it has to incur some cost. First, is the cost of sales which refers to the cost of buying the goods sold or cost of producing the goods sold (in the case of manufacturing companies). The difference between revenue and cost of sales is called the gross profit.

The second is expenses which includes operating expenses (which refers to cost incurred when carrying out the activities that generate revenue), interest expenses, tax expenses, etc. The difference between the revenue, cost of sales and all the above expenses is termed as Net profit. For better insight, it is good for you to consider all the three common profit margins which include gross profit margin, operating profit margin and net profit margin to determine the financial health of a company. The result should be compared with other companies in the same industry for better decision making.