Please click here to read an excellent article on how dividend payout ratio's are calculated. This writer further points out how they can be misleading. Finally the author suggests a better way to calculate the ability of a company to safely pay and increase their dividend.
I was closely looking at Chevron but this article gave me pause.
Way to many stock investors that are into buying high yield dividend stocks pay way to little attention to the quality of the company paying that dividend. Their focused to much on high yields and to little on the risk that a stock with a very high yield may have. Yields usually follow credit quality. A stock with a yield of 10% or higher is most likely not in the investment grade class as far as the credit quality of the company paying that dividend goes. The company with a very high yield also has a very high likelihood of reducing or even doing away with their dividend altogether. And if the dividend is eliminated altogether the price of the stock could be cut in half.
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