Ceiling Price Calculator (Bazin)
ℹ️ How the Bazin Method Works
The method by Décio Bazin, one of Brazil's greatest investors, focuses on finding the 'ceiling price' to buy a stock of a good dividend-paying company. The goal is to ensure a minimum return from dividends, which Bazin set at 6% per year. The formula is simple:
Ceiling Price = Average Annual Dividend / (Desired DY / 100)- Average Dividends: Calculate the average of the dividends paid per share over the last 5 years. For companies with less time on the market, use the average for the entire available period. This helps to smooth out fluctuations and provides a more stable view of the earnings.
- Desired Dividend Yield (DY): This is the minimum return you wish to receive in dividends. Bazin suggested 6%, but you can adjust this value according to your strategy.
By purchasing a stock below the calculated ceiling price, you increase your margin of safety and the likelihood of achieving your desired return with dividends.
Practical Example (TAEE11)
Let's say you want to calculate the ceiling price for Taesa (TAEE11) shares. First, you look up the dividend history for the last 5 years (hypothetical values for illustration): $3.00, $3.50, $4.00, $2.50, and $2.00.
- Dividend Average: ($3.00 + $3.50 + $4.00 + $2.50 + $2.00) / 5 = $3.00 per share.
- Desired DY: You set your goal at 6%.
Ceiling Price Calculation: $3.00 / 0.06 = $50.00. Therefore, according to the method, the ideal price to buy TAEE11 would be below $50.00 to ensure a 6% return in dividends.
Facts about Bazin Method
- Décio Bazin was a prominent Brazilian investor and journalist.
- The method targets stocks with a minimum dividend yield of 6%.
- It filters out companies with high debt or opaque financials.
- Bazin's ceiling price ensures a margin of safety for buyers.