What is dividend yield?
In one line: Dividend yield is a stock's yearly dividend per share divided by its share price, shown as a percent.
A simple example
A company pays $0.50 per share every quarter. That's $2.00 a year.
The share price is $50. Dividend yield: $2.00 ÷ $50 = 4%.
If you owned 100 shares, that's about $200 a year in dividends, as long as the company keeps paying the same amount. A math example, not a promise.
Work out your own in the dividend calculator.
Why the yield moves
Yield has two parts, and either can change.
| Change | Dividend | Price | Yield |
|---|---|---|---|
| Start | $2.00 | $50 | 4% |
| Price falls | $2.00 | $40 | 5% |
| Price rises | $2.00 | $64 | 3.1% |
| Dividend cut | $1.00 | $40 | 2.5% |
The same dividend gives a higher yield when the price drops.
Why it matters
Yield lets you compare payouts across stocks of different prices. A $200 stock paying $4 and a $50 stock paying $1 both yield 2%.
It's also only part of the result. Total return adds the price change, which can be much bigger than the dividend.
A common mistake
Chasing the highest yield. A very high yield often comes from a falling price. The market may expect the dividend to be cut. If it is, you can lose on both the price and the payout. People call this a "yield trap."
Dividends are never guaranteed. Companies can cut or stop them. Look at whether earnings cover the dividend, often called the payout ratio, before trusting a big yield.
Questions
Is dividend yield paid monthly?
Yield is a yearly number. The payments themselves are often quarterly in the US, sometimes monthly or yearly.
What is a good dividend yield?
It depends on the sector and on interest rates. A yield far above similar companies is a reason to look closer, not a reason to buy.
Do I get the dividend if I buy the day before it's paid?
Not necessarily. What counts is owning the shares before the Ex-dividend date.
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