Dividend Yield Calculator
Calculate your investment's annual return from dividends
Dividend Yield
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Annual Income
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Understanding Dividend Yield
The dividend yield is a financial ratio that indicates how much a company pays out in dividends each year relative to its stock price. It is a key metric for income-focused investors looking to compare the cash flow potential of different stocks.
The Dividend Yield Formula
Dividend Yield = (Annual Dividends Per Share / Current Stock Price) x 100
Example Calculation
If "Company A" pays an annual dividend of $5.00 per share and the stock is currently trading at $100.00, the dividend yield is 5% ($5 / $100). If the stock price drops to $80.00 while the dividend remains the same, the yield would increase to 6.25%.
Why is this important?
- Income Generation: It helps you estimate how much passive income an investment will generate.
- Risk Assessment: Unusually high yields (yield traps) may indicate that a company's stock price has crashed or that the dividend payout is unsustainable.
- Relative Valuation: Compare dividend yields against Treasury bonds or savings account interest rates to evaluate opportunity costs.