These numbers are keys to our investment strategy
Dividend investing is part art, part science. Financial ratios make up most of the science behind investing.
What exactly are financial ratios? For the purposes of this article, we define financial ratios as any number or calculation used by dividend investors to better understand an investment opportunity. Financial ratios are found throughout a company’s financial statements, annual reports, investor presentations, and more. Some examples of common financial metrics include return on equity, payout ratios, and price-to-earnings multiples.
While there are literally hundreds (if not thousands) of different financial ratios, understanding a handful of the most important indicators can help investors make better informed decisions and sidestep avoidable mistakes.
Let’s take a close look at the financial ratios that are most helpful for evaluating different businesses...