Blog / FAST Graphs – Honeydew Dividend Line – Explanation and Video

FAST Graphs – Honeydew Dividend Line – Explanation and Video

There has been a lot of misunderstanding regarding FAST Graphs and how we display dividend information.  For starters, the only honeydew colored line on the graph is what everyone calls the white line.  For you to understand this better, go down to the bottom of the graph in the long orange rectangle and take off (click on the words) price, normal P/E, EPS and dividends and only leave the tag dividends POR.  If you do this, you will note that the actual colorization of that line is honeydew green (with shading emphasis added).

In contrast, the light green shaded area stacked on top of the orange line is not, let me repeat, it is not honeydew green.  Instead, it is light green, and actually a lighter version of the dark green shading which indicates earnings.

Furthermore, regarding why we display the dividends with the light green shading stacked on top of the orange line is extremely relevant..  Conceptually it relates to the reality that total return is a function of capital appreciation plus dividend income.  Consequently, the capital appreciation component will be when the black monthly closing price line follows the orange line.  A good current example would be Stanley Black & Decker Inc. (SWK).

The capital appreciation is a function of the orange line moving from point A (the beginning) to point B the ending value.  In addition to the capital gain that that relationship generates, you have the dividend income which is paid out (the income component of total return).  Therefore, the light green shading on top of the orange line simply indicates that total return will be a function of the price following that orange line plus the investor receiving the light green shaded area portion of the dividends.

Regarding the placement of the dividend payout ratio line, which is actually honeydew colored but most people see as white (see my instructions above), it is extremely relevant to the graphs.  As soon as you draw a graph you can instantly see if the company is paying out a large portion of earnings or not.  If you’d like to see a couple of relevant examples graph Southern Company (SO), a high payout ratio company, and then graph Danaher Corporation (DHR) a very low payout ratio company.  The placement of the white (honeydew colored) line provides instantaneous graphical expressions of the total portion of earnings that the company pays out.  Later, you can go to the performance report and see the actual percentages displayed in the payout ratio:

Additionally, the dividends when they are expressed by the white line (honeydew color) are the portion of earnings that are eventually paid out while they still belong to the company.  In contrast, the light green shaded area, which is precisely the same as the dark green shaded area below the white line, is illustrating the dividends after they’ve been paid out to the shareholder.

Finally, the pop-ups that do appear on the white line currently are simply illustrating what would happen if the price fell to that point on the graph.  In the future, as indicated with your comment, the pop up will state the date, dividend and dividend payout ratio.  Furthermore, if you don’t like the light green shaded area sitting on top of the orange line then I would respectfully suggest that you simply take it off your graphs.  Personally, I love the message that the light green shaded area delivers.  Nevertheless, thanks for sharing your views.  I’m presenting this short video to cover this more fully.  Please take a look: