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Have you heard about PEG ratio in UK Stock Market ever? No! Then how you calculate the future of a dividend paying stock in FTSE market. In this article I will be going to discuss what a PEG ratio means, how it is different from P/E ratio and also how it have been used to predict the future of a dividend paying stocks in FTSE Share market.  PEG Ratio is a short abbreviation to Price/Earnings to Growth Ratio.

For a particular stock it can be simply defined as Price to earnings Ratio (P/E) Divided by the growth rate of the stock’s earnings for a specified time duration.Price to earnings growth ratio

{{(P/E Ratio) / Annual EPS Growth}}} =Price /Earnings to Growth Ratio

What’s the Significance of PEG Ratio!!

PEG ratio indicates that the dividend paying stocks you are going to buy in UK’s FTSE Share market is overpriced or Under priced by evaluating the growth. Usually it varies according to industry, sectors and company type.  Though one thumb rule about PEG ratio is that it’s desirable to get this ratio under 1. There is another factor which matters a lot in calculating PEG and that is Accuracy.  If you are going to evaluate the PEG factor using the historical growth data it might be possible that future growth data deviate from the historical growth data. So to differentiate between the evaluations using historical and future growth sometimes two terms like Trailing PEG and Forward PEG is used.

P/E Ratio: Market Value per Share/ Earnings per Share

As we know that it is often advisable by the experts to choose such stocks which are running under priced instead of those stocks who are overpriced and this is the best way to choose Best dividend stocks in UK’s FTSE Indices.  P/E ratio basically tells you that a particular dividend stocks in UK is overpriced or under priced as they basically let you know that how much profit a particular company is having per dividend stocks.  If you are looking for stocks which can yield you high dividend yield at regular interval then you should be going to pick stocks on the basis on the basis of P/E Ratio and on the basis of PEG Ratio as these two factors are enough to dictate that how a dividend paying stock in UK will be performing in next few days and how much dividend it will be giving you based on the current performance.

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