The short answer here is yes, but anyone asking this could probably use a quick catch-up on yields, so let’s get to it. First, let’s talk about dividend yield.
(Please note: this piece was written nearly two weeks ago while I was travelling in case news was slow or I got pinched for time, so the current market price of MREIT is likely out of date. Experienced investors won’t have any problems with that, but inexperienced investors, hear this: For the purposes of this example, the market price isn’t all that important!)
> Annualized yield: The two most popular methods of calculating yield are annualized yield (AY) and trailing 12-month (TTM). For AY, we take the most recent dividend and multiply it by the number of anticipated dividends for the remainder of the year to estimate what a full year’s worth of dividends at this rate would look like, then we divide that number by the stock’s current price. For MREIT, its most recent dividend was P0.25047, but that div only covered one quarter of earnings. To annualize it, we multiply that by 4 (the number of quarters in a year), and we get P1.00188. That’s the total dividends per share a MREIT shareholder would get if all four of MREIT’s next four quarterly dividends were P0.25047. The current price is P13.68, so 1.00188/13.68 is 0.07377614138. Multiply by 100 to convert it to a percentage, and we get (rounded) 7.4% annualized yield.
> TTM yield: To calculate MREIT’’s TTM, I just note that it pays quarterly, and then I add up the four most recent dividends (0.2474, 0.2489, 0.2505, and 0.25047 = 0.99727), and divide that by the current price, so 0.99727/13.68 is 0.0728998538; multiply by 100 and you get 7.3% TTM yield.
> Two ways to change yield: As you can tell from these examples, regardless of how we calculate the yield, the two basic ways to change yield are the size of the dividend and the stock price. Just for fun, let’s assume that MREIT always pays exactly the same dividend every single time (P0.25/share), and let’s say that Rodrigo bought MREIT back in early 2022 for P21.50/share, and Ferdinand bought MREIT in late 2023 for P12.50/share. If we annualized that stable dividend (0.25 * 4 = 1.00) and divided by the current price, we’d get an annualized yield of 7.3%, but that’s the yield of someone who bought at P13.68/share today. Rodrigo and Ferdinand both receive P1.00/year in dividends, so if we divide the annualized amount by their purchase price, we get the yield specific to their positions. For Rodrigo, it’s 4.7% (1.00/21.50 = 0.0465) and for Ferdinand, it’s 8.0% (1.00/12.50 = 0.08).
> But they both get the same? Yes, they do, in absolute terms. Both Rodrigo and Ferdinand get P0.25 per quarter for each share that they own; it’s just that they paid wildly different prices for the right to receive that share of MREIT’s income. That’s the essence of what yield attempts to track: how much do you get back relative to what you paid? All else being equal, I’m sure most people would rather pay P12,500 for a thousand shares of MREIT to earn P1,000 per year in dividends than P21,500 to get that same thousand shares and same P1,000 per year.
MB BOTTOM-LINE: So yes, my annualized yield metric is based on the current price, so if you bought the stock for less than the current price, your yield will be higher than the annualized yield. That doesn’t mean you get more money, it just means that your investment is more efficient at generating dividends than someone who purchases the stock today at the current market price. In the Rodrigo vs Ferdinand example, both investors have the same number of shares and get the same dividends, but Ferdinand was just the more efficient investor.
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