I will illustrate the differences and characteristics of RER, PBR, ROE, dividend yield, and dividend payout, which are indicators of equity investment. Let’s understand it by the image including how to remember it.
PER: Price Earnings Ratio
PER is an indicator of the stock price divided by net income per share, and is an indicator of the low price of the stock price to profit. About 15-20 times the average level.
PBR: Price Bookvalue Ratio
PBR is an index of stock price divided by net assets per share, and is an indicator of the low price of stock prices for net assets. 1x is the basic level.
ROE: Return On Equity
ROE is an indicator of net income divided by equity capital, and you can see how much you are profiting from equity capital. The standard of ROE varies from industry to industry, but it is said to be about 10%, and when it exceeds 20%, it is evaluated as a good company.
The dividend yield is an indicator of the dividend per share divided by the stock price, and you can see the percentage of dividends that can be received in one year for the stock price.
For investors, it is an indicator of how much return they can get for their investment. In general, from an investor’s point of view, it is ideal to choose stocks with good dividend yields that will yield a large return on investment.
The dividend payout ratio is an indicator of dividends divided by net income, and you can immediately see the percentage of profit that was returned to shareholders. It seems that 30% is often used as a guide.
For investors, it is an indicator of how much the target company holds its profits internally and how much it returns to investors. As a company, we would like to keep dividends low and leave a lot of profits to be used for future working capital and capital investment, but from an investor’s point of view, we would like to choose a company that will return many dividends to shareholders.