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Dividend Yield

Dividend yield formula

The dividend yield says how much a stock pays in dividends each year, expressed as a percentage of the stock price. It is how much you get paid for investing in the stock, like the interest on a bank account.

For example, if a stock that costs $100 pays $2 in dividends per share each year, then the dividend yield is 2%.

Dividend yields vary greatly between stocks, and not all of them pay dividends. It is more common for mature and well-established companies, but rare among newer companies that are growing fast.

Key Points

  • Dividend payments are usually paid quarterly (every three months), but can also be paid on different schedules. They are usually paid via direct deposit into the investor's brokerage account.
  • Dividends are not guaranteed and can be increased, decreased or even cut completely by a company's board of directors.
  • Most reported dividend yields are trailing, meaning they look at the past 12 months of payments. A "forward" yield estimates what the dividend will be over the next year.
  • The dividend yield changes inversely with the stock price. If the price goes up, the yield goes down, and vice versa.
  • The payout ratio measures the percentage of profits paid out as dividends. If it is very high, then the dividend may not be sustainable.
  • A very high dividend yield can indicate that a company's future prospects are poor, so it may not be a good investment.

Dividend Yield Calculator


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How to calculate

Here are the 4 steps to calculate a stock's dividend yield:

  1. Find the amount of the last quarterly dividend payment.
  2. Multiply that number by four to calculate the annual payment.
  3. Divide the annual amount by the stock price.
  4. Multiply by 100 to convert to a percentage yield.

Example

Example calculation for Apple stock:

  1. At the time of writing, Apple's last quarterly dividend was $0.82.
  2. Multiplying that number by four gives an annual payment of $3.28.
  3. Then the annual payment is divided by the stock price of $351.73. This gives a ratio of 0.00933.
  4. Multiplying by 100% gives a dividend yield of 0.933%.