Dividend yield

Dividend yield = Annual dividend / Share price

The dividend yield is a financial metric that represents the return on investment from dividends alone, expressed as a percentage. It is calculated by dividing the annual dividend per share by the current share price. This measure helps investors understand the income they can expect from dividends relative to the price of the stock.

Example

If a company pays an annual dividend of $2 per share and its current share price is $40, the dividend yield would be 5% ($2 / $40 * 100).

Understanding the dividend yield is crucial for investors who prioritize income from dividends as part of their total return strategy.

Related concepts

Earnings per share

Earnings per share (EPS) = Net income / Shares outstanding

Dividend discount model

D₁/(r - g) = stock price

Stock split

Stock split doubles shares, halves price

Market capitalization

Market capitalization = share price × shares outstanding

Yield curve

Yield curves show interest rates across different maturities

Stock

A single share represents fractional ownership of a company

Educational content, not financial advice.

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