Dividend Yield Calculator
Calculate the annual percentage return on your stock investments based on dividend payouts.
What is Dividend Yield?
The dividend yield is a financial ratio that shows how much a company pays out in dividends each year relative to its stock price. It is expressed as a percentage and represents the "cash flow" return an investor receives for every dollar held in the stock, excluding capital gains.
The Dividend Yield Formula
The calculation is straightforward. You divide the total annual dividend payments per share by the current share price:
Why Investors Use This Calculator
Investors focused on income, such as retirees or "Dividend Growth Investors," use this metric to compare different stocks. A higher yield might indicate a better return on investment, but it can also signal that the stock price has dropped significantly due to underlying business risks.
- Income Generation: Determine how much cash flow a portfolio will generate.
- Relative Valuation: Compare a stock's yield against historical averages or industry peers.
- Risk Assessment: Identify "yield traps" where a yield is unsustainably high.
Realistic Example Calculation
Scenario: You are looking at a blue-chip utility stock.
- Current Stock Price: $120.00
- Quarterly Dividend: $0.90 (which equals $3.60 annually)
Calculation: ($3.60 / $120.00) × 100 = 3.00%
This means for every $1,000 you invest, you can expect to receive $30 in annual dividend payments.
Important Considerations
While a high dividend yield is attractive, it is important to look at the Payout Ratio. If a company pays out more than it earns, the dividend may be at risk of being cut. Always consider the company's financial health alongside the yield percentage provided by this calculator.