Dividend Yield Calculator
Calculate your investment returns and annual passive income
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. It is expressed as a percentage and is a key metric for "income investors" who seek regular cash flow from their portfolio.
The Dividend Yield Formula
The calculation is straightforward but essential for comparing different dividend-paying stocks:
Dividend Yield = (Annual Dividends Per Share / Current Stock Price) × 100
How to Use This Calculator
- Stock Price: Enter the current trading price of the stock.
- Dividend Amount: Enter the amount of the last dividend payment (e.g., $0.50).
- Payout Frequency: Select how often the company pays (most US stocks pay Quarterly).
- Number of Shares: Entering your share count helps calculate your actual cash return.
If Stock A is trading at $100 and pays a $1.25 dividend every quarter:
1. Annual Dividend = $1.25 × 4 = $5.00
2. Yield = ($5.00 / $100) × 100 = 5%
If you own 100 shares, your annual passive income would be $500.
Why Dividend Yield Matters
A high dividend yield can indicate that a stock is undervalued or that the company is returning significant capital to shareholders. However, investors must be cautious: an exceptionally high yield (often called a "yield trap") can sometimes mean the stock price has plummeted because the market expects the company to cut its dividend soon.
Yield vs. Yield on Cost
While this calculator determines the current yield based on today's price, many long-term investors track "Yield on Cost." This is calculated by dividing the current annual dividend by the price you originally paid for the stock. As companies increase their dividends over time, your yield on cost can grow significantly higher than the market's current yield.