Dividend Yield Calculator
Calculate your investment returns based on stock price and annual payouts.
What is Dividend Yield?
Dividend yield is a financial ratio that tells you how much a company pays out in dividends each year relative to its stock price. It is expressed as a percentage and is a critical metric for income-focused investors who want to generate cash flow from their portfolios.
Unlike capital gains, which are realized only when you sell a stock, dividends provide a steady stream of income while you hold the asset. This calculator helps you quickly determine that percentage to compare different investment opportunities.
The Dividend Yield Formula
The math behind the calculation is straightforward:
Practical Example
- The current stock price is $100.00.
- The company pays a quarterly dividend of $0.50 ($2.00 annually).
- Calculation: ($2.00 / $100.00) * 100 = 2.00% Yield.
Why Dividend Yield Matters
Investors use dividend yield for several reasons:
- Income Generation: Retired investors often rely on high-yield stocks to cover living expenses.
- Value Indicator: Sometimes, a very high yield can indicate that a stock is undervalued, or it could be a "dividend trap" where the price has plummeted due to financial trouble.
- Comparison: It allows you to compare the income potential of a stock against other assets like bonds or savings accounts.
What is a "Good" Dividend Yield?
Generally, a yield between 2% and 5% is considered healthy. While yields above 7% might seem attractive, they often come with higher risk. Always check the Dividend Payout Ratio to ensure the company can afford to keep paying those dividends from its earnings.