The Power of Equity
These two calculations quickly illustrate the power of equity:
- Multiply $1 by 0.77% or $(1 * 0.0077). The result is $0.0077
- Divide $1 by 2.52% or $(1 ÷ 0.0252). The result is $39.68
The first calculation shows what happens when you deposit $1 in a bank. You receive an interest rate return of 0.77% (as of January 28th, 2012), meaning you can walk away with $1.0077 in your pocket.
The second calculation shows what happens when a public company makes a $1 profit from your purchase and allocates the $1 profit for dividends. The dividend rate for public companies is 2.52% (as of January 28th 2012). The public company’s market value has increased by $39.68. But you only walked away with the product.
If you buy something for $10 and the public company earns $1 (or 10% from your $10 purchase) which produces or sustains a $39.68 increase in equity value, then why is the public company refusing to share this equity value with you?
Why is the public company not sharing the equity value with its customers whose purchases produced the equity value? The management of the public company did not produce this $39.68 in equity value. We as the customers produce this equity value.
Now that the solution to the consumer debt problem is found with Product Equity Value©, it is time for new (and old) public companies to step forward and do the right thing! What these companies ought to do is very simple; plus it is in their self-interest to share the equity value with their customers.
At the Equity Score® Network we give the customers the two values that they produce (and deserve) from spending their hard-earned cash with public companies: the product and the equity value.
What is the Dividend Rate?
The dividend rate or dividend yield is a financial ratio that shows how much a company pays out in dividends each year relative to its share price (see Dividend Yield definition at www.investopedia.com). This definition is summarized by the following equation:
Dividend Rate = Dividends ÷ Share Price
Rearranging the terms of the equation above gives you the following equation:
Share Price = Dividends ÷ Dividend Rate
The change in share price is the equity value that is supported by the $1 profit (or dividends). This is the equation you used when you divided $1 by 2.52%. Review this page with closer attention.
By understanding these calculations, you along with millions of other subscribers will wipe out your debt while increasing your Equity Score®.
A few examples of the power of equity
When you consider the huge difference between the equity value created ($39.68) and the interest generated ($0.0077), you will greet the numerical examples below with less surprise. There is a half a million percentage difference (515,195% to be exact) between the equity value created by $1 and the interest generated by $1.
It may seem nonsensical… but the numbers do not lie. Take a look at the 3 or 4 examples below.