UK Dividend Stocks – Know Some Crucial Terms for dividend Purchasing

Buying such stocks that pay you dividends often is not been so easy in past. Here it must be clearly understood by one one who is willing to invest in share market that to understand the dividend stocks of companies listed in stock market you need to first understand the basics of stocks market of UK i.e. London Stock Exchange. Some People Get Confused with FTSE 100 or FTSE Dividends.

FTSE refers to a company that is specialized in index calculation, though it’s not considered as a part of stock exchange. It is co-operated by London Stock Exchange and Financial Times. FTSE can be consider pretty similar to Standard’s & Poor’s in USA. FTSE Indices are best known as the FTSE 1oo which is an indices of top 100 blue chip stocks and Dividends which are earned through stocks of such blue chip companies are known as FTSE 100 Dividend Stocks in UK.

Stocks can be of two type i.e. common stocks and preferred stocks. Most of the stocks purchased by general public are common stocks as they have dividend sharing and voting rights associated with them. On the Other hand Preferred stocks has pretty few rights associated with them except in one important area that is dividend Payment. Companies who sells their preferred stocks generally pays a consistent amount of money as dividend and such stock holders will get dividend on first call on first priority compare to the individuals who hold common stocks in UK.

Here I am explaining some Dividend paying stocks related terminology with which professional financial investors been familiar very well but for a newbie investor it’s remain hard to understand such financial terms and their significance in stock investment.

Dividend Payout Ratio:

Dividend Payout Ratio plays an important part for an individual when he looks for best dividend paying stocks in stocks market of countries like UK where there are variety of stock choices available. It is basically defined as the percentage of earnings paid out to investors or shareholders in form of dividends. Remember a reduced amount of dividends paid on earnings is a poor sign and in that case many investors looks for other high dividend paying stocks in UK. On the other hand a stable dividend payout ratio indicates a solid Dividends Policy maintained by the board of directors of that company for their shareholders. It makes a lot of sense for investors in UK to invest in such companies as they provide comparatively high dividend yield quite often to investors.

Dividend per Share:

It is simply the sum of dividends declared by the company for each and every share an investor own. It can be calculated using the below formula

DPS=D-SD/S

Where D is the Sum of dividend issued by the company over a period (normally it becomes 1 year)\

SD is Special Dividend also known as one time dividend in UK stock Market

S is the number of shares outstanding for the particular period.

Dividend Per share are used to calculate the dividend Yield and it can be found on the quote page in most recent dividends paid section.

Dividend Recapitalization:

Dividend Recapitalization in Financial terms means simply payment made to shareholders by the company but it’s paid out to them in an opposite way from regular dividend are being paid out. IN such cases normally a company raises its debt and issues bonds to fund their Dividend Stocks in UK.

Author has been writing articles on UK Dividends, Ftse Dividends since a decade. This article was based on Top dividend Yield UK Dividends.