I have a question about determining the cheapness of a stock when dividend yield and PE are telling different stories. Also, from a perspective of an income investor and a capital gains focused investor. Let's take KO for example in two periods shown in the image below. KO PE and dividend yield for 2011 and 2020:
So, in 2011 the values were: PE = 10 and DY = 2.7%. According to PE the stock is cheap, but according to dividend yield not so much.
Now, lets look at 2020: PE = 21 and DY = 3.7%. According to dividend yield the stock is cheap, but PE is saying it's expensive.
(I guess the reason for the March 2020 values is that the price dropped, but earnings dropped more, so PE is high, but dividend yield is also pretty high.)
I have three questions:
- When was/is the stock cheaper and how do we determine this?
- Maybe it's cheap in both cases, but for different audiences. For example, if you're a more capital gains oriented investor the 2011 case might be of more interest to you. On the other hand, if you're an income investor the 2020 situation might look nice. Is this the case here?
- For an income oriented investor, would you say that the KO stock is cheap in March 2020?