Dividend Yield
Annual dividend per share divided by stock price, expressed as a percentage. Shows income return relative to current price.
Formula
Dividend Yield = Annual Dividend Per Share ÷ Share Price × 100
Dividend yield expresses a stock's annual dividend as a percentage of its current price. It lets investors compare income across different stocks and against bond yields on an apples-to-apples basis.
Yield moves inversely to price: if a stock falls but the dividend is unchanged, the yield rises. A very high yield — often above 6–8% — can be a warning sign (yield trap) that the market is pricing in a dividend cut.
Yield should be evaluated alongside the payout ratio (dividends ÷ earnings). A 90%+ payout ratio leaves little buffer; a 40–60% ratio is considered sustainable for most sectors.
Example
A stock trades at $100 and pays $3.60 annually in dividends. Dividend yield = $3.60 ÷ $100 = 3.6%. If the stock drops to $80, the yield rises to 4.5% — attractive on paper, but check whether the dividend is safe.
Related Terms
Blue-Chip Stock
Shares of a large, well-established company with a long track record of stable earnings and often consistent dividends.
BeginnerDividend
A cash (or stock) payment a company makes to shareholders from its profits, typically on a quarterly schedule.
BeginnerDividend Payout Ratio
The share of earnings paid out as dividends. A low ratio leaves room to grow the dividend; a very high one signals fragility.
IntermediateEx-Dividend Date
The cutoff date to own shares and qualify for the next dividend payment. Buy on or after this date and you miss the dividend.
IntermediateMarket-on-Close (MOC) Order
A market order that executes in the official closing auction at the day's closing price. Used to guarantee a close print; large MOC imbalances can move price into the bell.
Intermediate