1. Identify those Company Stock which is Paying Dividends for the at least 5 Consecutive Years if a company is 8+ Years Old and if a company is just 5+ Years old then it should have paid Dividends for at-least 3 Consecutive years, But if a company is just 3 Years old then see their track record for the Next 3 years.
2. Which ever Company you have shortlisted now look for its Growth record of at-least last 3 years.
Year on Year its Revenue should grow by at-least 15 % and Net Profit by 20% Year on Year.
3. Now you have further filtered your List of companies, Now you want to Purchase the shares of that Company in the Secondary Market, but confused at what rate to Buy !! Now how to calculate the Price at what you should buy so that u never suffer a Loss when u purchase those Company shares.
4. Let us say in Last 3 years the Company has Paid a Cash Dividend of 15 Rs, 20 Rs and 25 Rs.
So the Risk free Purchase Price of that company should be :-
1. 15+20+25 = 60 Rs.
2. Average Dividend Per share = 60/3= 20 Rs.
3. Fair Price / Maximum Price to buy that shares in Market rate is Equal to = Average Dividend *20 = 20*20 = 400 Rs Per share.
4. Note In case of country Like Nepal where there is Less Valuation for Brand Name and Economy size is not that big so here in this Case instead of 20 we should use 15.
5. So final Maximum rate you can offer to Purchase is 20*15= 300 Per shares.
Hope this Concept is helpful for the Investor !! This will help People You can make their Own Decision where they don't require the help of others so called Experts and Insider Informer and even TA Like me and others !!!
Happy Investment !!