The One Thing You Need to Know to Become a Better Investor and Build a Solid Dividend Portfolio

4/9/20253 min read

If you're looking to become a smarter investor and build a solid, stress-free portfolio, there’s one simple concept that can completely change your game: knowing the maximum price you should pay for a stock based on its dividend payouts.

In this article, you’ll learn how to apply this straightforward strategy — used by legendary Brazilian investor Luiz Barsi — to figure out the fair value of a stock based on your desired dividend yield.

What Is Dividend Yield?

Dividend yield is a key metric that tells you how much a company pays in dividends relative to its stock price. It’s a percentage that shows your return on investment from dividends alone.

Formula:

Dividend Yield=(Annual Dividend per ShareStock Price)×100\text{Dividend Yield} = \left( \frac{\text{Annual Dividend per Share}}{\text{Stock Price}} \right) \times 100Dividend Yield=(Stock PriceAnnual Dividend per Share)×100

For example, if a company pays $5.00 per share annually and the stock is trading at $50:

550=0.10=10%\frac{5}{50} = 0.10 = 10\%505=0.10=10%

This means you're earning a 10% return on your investment just from dividends.

How to Calculate the Maximum Price You Should Pay for a Stock

Here’s where things get interesting: instead of simply looking at the current yield, you can reverse-engineer the math to find the maximum price you should pay to get a specific return.

Let’s say you want a 6% annual dividend yield. Just divide the annual dividend by 6%.

Formula:

Max Price=Dividend per Share0.06\text{Max Price} = \frac{\text{Dividend per Share}}{0.06}Max Price=0.06Dividend per Share

Example:

If a stock pays $2.40 per share annually:

2.400.06=$40.00\frac{2.40}{0.06} = \$40.000.062.40=$40.00

So, to earn 6% in dividends, you shouldn’t pay more than $40 per share.

Real-Life Examples Using 2020 Data

Let’s walk through some real-world examples using data from 2020 to see how this strategy works in practice.

1. Taesa (TAEE11 – Brazilian Utility Company)

Dividend: R$ 3.21 per share
Target yield: 6%

3.210.06=R$53.50\frac{3.21}{0.06} = R\$ 53.500.063.21=R$53.50

If the stock is trading below R$ 53.50, you’ll earn at least 6%.

2. B3 (Brazil’s Stock Exchange - B3SA3)

Adjusted dividend: R$ 0.87 per share (after stock split)
Target yield: 6%

0.870.06=R$14.56\frac{0.87}{0.06} = R\$ 14.560.060.87=R$14.56

If the stock is trading above R$ 14.56, your yield will be lower than 6%.

3. Fleury (FLRY3 – Healthcare Company)

Total dividend payout: R$ 296 million
Number of shares: 317 million

296,000,000317,000,000=R$0.93 per share\frac{296,000,000}{317,000,000} = R\$ 0.93 \text{ per share}317,000,000296,000,000=R$0.93 per share0.930.06=R$15.50\frac{0.93}{0.06} = R\$ 15.500.060.93=R$15.50

If the stock is trading at R$ 25, it's overvalued from a 6% yield perspective.

Why This Strategy Works

This price ceiling strategy is used by seasoned investors like Luiz Barsi and his daughter Luísa Barsi because it keeps investing disciplined and consistent. When you define a maximum price to pay based on your income goals, you avoid overpaying and stick to a smart long-term plan.

And here’s the kicker: unlike fixed income where your 6% is flat, dividends can grow over time. So, your yield on cost can increase exponentially as the company grows and pays more.

How to Start Building a Dividend Portfolio

Identify companies with a strong dividend history.
Find their historical dividend payouts.
Choose your target yield (e.g., 6%) and calculate the max price.
Only invest when the stock trades below that price.
Build a diversified portfolio to reduce risk.

Final Thoughts

You don’t need to be a Wall Street pro to start investing wisely. If you understand this one key concept — buying only when the price offers the dividend yield you want — you’ll be miles ahead of most investors.

Want more practical investing tips? Stick around. We’ll continue publishing simple, powerful strategies that help you invest smarter and build real financial freedom.

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