Dividend Yield Calculator
Calculate your annual investment return from stock dividends instantly.
How to Use the Dividend Yield Calculator
This professional tool helps investors determine the efficiency of their income-producing assets. Dividend yield is a critical metric for "Income Investors" who prioritize cash flow over capital gains.
What is Dividend Yield?
Dividend yield is a financial ratio that shows how much a company pays out in dividends each year relative to its stock price. Unlike capital gains, which are only realized when you sell a stock, the dividend yield represents the "cash-on-cash" return you receive simply for holding the asset.
If Company A trades at $100 per share and pays an annual dividend of $5.00, the dividend yield is 5% ($5 / $100). If the stock price drops to $80 but the dividend remains $5.00, the yield rises to 6.25%.
The Dividend Yield Formula
The calculation is straightforward but provides profound insights into valuation:
Dividend Yield = (Annual Dividend Per Share / Current Stock Price) x 100
Why Dividend Yield Matters
- Income Generation: It tells you how much passive income you can expect for every dollar invested.
- Valuation Signal: A very high yield might indicate a "dividend trap" where the market expects a dividend cut, while a low yield might indicate a high-growth company reinvesting its profits.
- Comparison Tool: Use it to compare different stocks within the same sector (e.g., comparing Utility Stock A vs Utility Stock B).
- Compounding Power: Reinvesting high-yield dividends can significantly accelerate portfolio growth over long periods.
What is a Good Dividend Yield?
While "good" is subjective, most investors consider a yield between 2% and 5% to be healthy. Yields above 8% often carry higher risk, as the market may be signaling that the current payout is unsustainable. Conversely, a yield below 1% might suggest the company is focused on aggressive expansion rather than returning cash to shareholders.