Stock value according to dividend yield and PE, from an income investor's and a capital gains investor's perspective

Question

I have a question about determining the cheapness of a stock when dividend yield and PE are telling different stories. Also, from a perspective of an income investor and a capital gains focused investor. Let's take KO for example in two periods shown in the image below. KO PE and dividend yield for 2011 and 2020:

So, in 2011 the values were: PE = 10 and DY = 2.7%.
According to PE the stock is cheap, but according to dividend yield not so much.
Now, lets look at 2020: PE = 21 and DY = 3.7%.
According to dividend yield the stock is cheap, but PE is saying it's expensive.
(I guess the reason for the March 2020 values is that the price dropped, but earnings dropped more, so PE is high, but dividend yield is also pretty high.)
I have three questions:

When was/is the stock cheaper and how do we determine this?
Maybe it's cheap in both cases, but for different audiences. For example, if you're a more capital gains oriented investor the 2011 case might be of more interest to you. On the other hand, if you're an income investor the 2020 situation might look nice. Is this the case here?
For an income oriented investor, would you say that the KO stock is cheap in March 2020?

S Spring · Answer

A P/E ratio of 10 and a dividend yield of 2.7% represents a payout ratio of 27.0%.

A P/E ratio of 21 and a dividend yield of 3.7% represents a payout ratio of 77.7%.

If the P/E ratio of 10 had a payout ratio of 77.7% then that would be a dividend yield of 7.8%.

Basically, the dividend yield, combined with a varying payout ratio, does not indicate a relative stock value but a relative risk of the use of corporate cash.

Other notable fundamentals are the gross margin, net margin, and debt-to-equity ratio. In fact a high debt-to-equity ratio is often combined with a high dividend payout ratio so that the bond buyers know that the bonds can be hedged with a liquid stock.

RWP - Down by the Bay · Answer

Don't get caught up in dividend yield.  Instead, focus on the earnings yield. Dividend yield hasn't been shown to be helpful after controlling for other factors like earnings yield, value and lower volatility.  Check out Table 1 here: Dividend Investing: A Value Tilt in Disguise? by Gregg S. Fisher.
We're getting into factor investing now, a subject on which an incredible amount has been written.  I'm not even going to try and summarize the research as I'm sure there are better sources out there.

Stock value according to dividend yield and PE, from an income investor's and a capital gains investor's perspective

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