Micro Cap, High Dividend Stocks: Waiting for Payback

The payback period answers the following question: "How long would it take for a dividend-paying stock to pay back the stock's original price?" The time it takes for an investment's cash outflows to sum to the original outlay is called the payback period, and it is considered a simplistic and crude measure of risk. Payback periods were calculated for large-cap, mid-cap, and small-cap stocks in prior articles and are calculated here for micro-cap stocks with dividend yields exceeding 4%. Payback period estimates depend on earnings growth and dividend payout ratios. Changes to dividend yield were projected by taking the minimum of the following: Earnings growth over the past five years Analyst estimates for earnings growth for the next five years Return on equity times the earnings reinvestment rate The minimum of these measures was then used to estimate dividend growth for the next three years. Abnormal growth will not last... Read more