Which Oil Company would Warren Buffett Buy in August 2009
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Uploader Comments (MrAlanKendall)
All Comments (12)
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k. this is what i got so far.
value=(%net earning+%divedend) / price to book
price to book=share rpice divided by book value per share (assets-liabilities) divided by how many shares there are
divedend=(divedend return past 12 months divided by share price) x100% to get as percentage
how would you get net earning over the past 12 months? and if theres something wrong with what i ahve there ^ pleaaaaase comment and tell me how to fix it
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@Xshortie736 Thanks for pointing that out, I was wondering how can you add a dollar value to a percentage, it didn't make sense. I don't know if this is correct but the formula should go something like this (EPS+Dividend Per Share)/(Current Price/Book Value Per Share)
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Good comment, I recognize this as a weakness in the formula.
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Dude really you need to use the actual dividend amount not the percentage...example: if a company gave 20% dividend and made 0 profits (0 EPS), then your formula would give well over 15. This doesn't make sense. Just like EPS is a price per share, the divided should be a price per share...
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BP bounced off of 40 and then rose in 1993, 2003 and 2009 so under 40, BP is undervalued.
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Do you use tangible book value, or do you include tangibles too?
Also, I think Earnings are usually expressed before dividends. So if you add in dividends as part of your calculation, you're double-counting.
Also, how do you know that's the formula that Buffett uses? I've never heard of it before. I'm pretty sure everyone would know this formula if Buffett used it.
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why is the income in percentage? how did you get that?
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The dividend yield is the total dividend paid out in one year divided by the current price of the stock and multiply by 100 to get a percentage. Some web sites show what the dividend payment is per year or per quarter. If the dividend payment is per quarter you would get the dividend yield by (dividend*4)/(share_price_of_s
tock)*100 -
Thank you for the explanation. That makes sense.
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shouldn't the dividend payout be the amount of the dividend and not it's percentage of the share price?
zvibar1 2 years ago
The percent dividend yield goes up on a price dip so it favors buying quality companies on a price dip. Basically the lower the price, the higher the return. I have been modifying this formula for 5 years and if you use the dividend amount, it would favor high priced stocks that pay a large dividends and it would favor companies with high net profits.
MrAlanKendall 2 years ago