The Dividend adjusted PEG ratio help the investor to take both Dividend and Growth into account while calculating the fair value of the company. When you go for investing in dividend stocks, Dividend adjusted PEG Ratio plays an important role for it. This ratio introduces to compare the huge companies with the upcoming growing companies.
PEG ratio calculator
Dividend adjusted PEG Ratio is generally used to calculate the growth of the company along with the dividend yield. Dividend adjusted PEG ratio is derived from PEG (Price to earnings growth).
To calculate the PEG ratio, simply divide the stock P/E Ratio to the company expected to earn growth rate, we can get the value we are spending in the company per share looking at the current earning.
We have to assume the expected earnings growth rate for it.
PEG Ratio = Price to Earning Ratio/Earning Growth Rate
PEG ratio only provide the data for the current period and also help to compare with the other companies in the same sector.
Some companies with the high dividend, those companies use to distribute the share of profit to their shareholders as the dividend instead of investing back into the company.
PEG ratio help the investor to get nearer to the company valuation.
For the purpose of calculating the data, Dividend adjusted PEG Ratio simply add the dividend to earnings growth rate. The formulae now look like this both the cases, the Earning growth rate needs to be predicted.
PEG Ratio = Price to Earning Ratio/Earning Growth Rate + Dividend
Also, Read: Received Income Tax Notice? (Learn about It)
PEG Ratio Screener
When the market is sitting on the bull, and lots of stocks already double in last year performance, it is very difficult for the investor to select the gems, PEG ratio is one of a good example for the investor.
In the Bull market, the PE ratio indicates the High valuation of the stock but PEG ratio provides the real picture to the investor.