Dividends

Equity

The attributable value to the owners of a business.

Interest rate risk

The risk that long term investments carry more risk compared to short term investments.

Default risk

The risk that an investor might not receive the payments back.

Government bonds

Bonds that are generally safer than corporate bonds.

Equity holders

Owners of a business who are at the bottom of the pay out priority list.

Common stock

Ownership shares in a publicly held corporation.

P/E Ratio

Price per share divided by earnings per share.

Equity book value

The net worth of the firm according to the balance sheet.

Liquidation value

The net proceeds realized after selling all of the firm's assets and paying off any outstanding obligations.

Market Value

The price that the share is trading at on the stock market.

Cash flow assessment

The process of estimating the amount and timing of future cash flows expected from a stock.

Risk assessment

Evaluating the riskiness of future dividends and determining the expected rate of return from a comparable investment.

Present value equals price

Calculating the present value of expected future cash flows using the stock's rate of return.

Expected return

Calculated as (Div1 + P1 - P0) / P0, equal to dividend yield plus capital appreciation.

Return on equity (ROE)

Calculated as EPS / Book equity per share, indicating how much income the company made based on invested capital.

Valuation by comparables

Identifying similar firms within an industry to analyze price/earning ratios and price/book ratios.

Real interest rate

Calculated as (1 + Nominal interest rate) / (1 + inflation rate) - 1.

Payout ratio

Calculated as Dividends / Earnings * 100, indicating the fraction of earnings paid out as dividends.

Plowback ratio

The portion of earnings not paid out as dividends, calculated as 1 - dividend paid out.

Free cash flow

The cash left over after all necessary investments for growth are made, available to pay out to investors.

Horizon value

The value of a firm at the end of a forecast period.