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+--- Thread: Chevron (/showthread.php?tid=1146)
Chevron - NVLong4n1 - 04-11-2015
I have been studying the U.S.DividendChampions spreadsheet and had a question. Chevron (CVX) shows a 4.08 percent yield and the 10 year dividend growth rate was 10.7 percent so I thought this would be a good purchase, however I also see that the 5 year estimated payback is only 22.1 percent which is only 4.42 percent per year. This is low. Does anyone know how this 5 year estimate is determined? Also is it correct? Wher should I go to research this estimat for myself?
Thanks for your help
Nelson
RE: Chevron - Dividend Watcher - 04-11-2015
From the Notes tab of the spreadsheet:
Quote:(Next Five Years) Dividends based on growth from latest completed year of dividends paid, using Next Year and 5-year Earnings Per Share Estimates. (If either is "n/a," then a 3% dividend growth rate is used; if either is negative, then a 1% dividend growth rate is used; if either is greater than 10%, then a 10% dividend growth rate is used. The total estimated dividends per share for the next five years is also shown, and that total is translated into a percentage "payback," based on the current share price.
In plain English, the last year's total dividend is multiplied by the EPS estimated growth rate (column 'AE') to come up with the indicated dividend for each of the next 5 years (cols 'CD' through 'CH'). Note some assumptions if the numbers are out of bounds to be mathematically usable --the bolded part. Then you add all these estimated dividends up (col 'CI') and divide by the share price listed in the spreadsheet (col 'H'). This is your payback percentage -- how much you spent for 1 share you will theoretically receive in future dividends over the next five years.
It's an estimation. Consider CVX has around a 4% yield and its next 5 year EPS growth rate is negative, he's using a 1% growth rate for the dividend which puts your 4.4% per year within range.
For companies with positive forward estimates, this assumes the payout ratio doesn't change and earnings grow as estimated. To me, it's a reasonable estimation of future dividend growth. Hope that's understandable.