Dividends and Different Starting Prices

What I was looking at with this spreadsheet was how would the original stock price affect how much of the original stock price is covered by dividends and yield on original stock price. I looked at two stocks of Canadian Utilities Ltd. (TSX-CU, OTC-CDUAF) and Great-West Lifeco Inc. (TSX-GWO, OTC-GWLIF).

So let's start with Canadian Utilities Ltd. If you had bought this stock 5 years ago at the high, low or median price, the dividends paid to date would cover 18%, 23% and 20% of the cost of the stock of 5 years ago. So if you paid the highest price, the stock cost coverage would be 11% less than if you paid the median price. If you paid the lowest price, the stock cost coverage would be 14.5% higher than if you paid the median price.

Taking figures from my Canadian Utilities Ltd. spreadsheet, if you paid a median price 5 years ago, that price would be $24.19. The dividends collected would be $0.81, $0.89, $0.97, $1.07 and $1.18. This would add up to $4.91. If you dividend $24.19 into $4.91 the answer is 20%. The high price was $27.25 and the low price was $21.13.

Now suppose you bought this company 15 years ago. If you paid the high, low or median price at that time, the dividends paid to date would cover 85%, 141% and 106% of your original stock price. So if you paid the highest price, the stock cost coverage would be 20% less than if you paid the median price. If you paid the lowest price, the stock cost coverage would be 33% higher than if you paid the median price.

With Great-West Lifeco Inc., if you had bought this stock 5 years ago at the high, low or median price, the dividends paid to date would cover 21%, 26% and 23% of the cost of the stock 5 years ago. So if you paid the highest price, the stock cost coverage would be 9% less than if you paid the median price. If you paid the lowest price, the stock cost coverage would be 11% higher than if you paid the median price.

Now suppose you bought this company 15 years ago. If you paid the high, low or median price at that time, the dividends paid to date would cover 80%, 176% and 110% of your original stock price. So if you paid the highest price, the stock cost coverage would be 27% less than if you paid the median price. If you paid the lowest price, the stock cost coverage would be 60% higher than if you paid the median price.

There is a similar effect on the dividend yield on your original purchase price. The longer you have a stock, the more the effect of paying a relatively high price. It is often difficult to get a stock at the low end of a price range, but it is often possible to get a stock at a relative median and below the relative median price.

See the spreadsheet here.

On my other blog I am today writing about Gluskin Sheff + Associates Inc. (TSX-GS, OTC-GLUSF) ... continue...

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

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