Investing
Dividend Yield
The annual dividend payment divided by the stock price, expressed as a percentage.
Definition
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 calculated by dividing the annual dividends per share by the price per share. For example, a stock trading at $100 that pays $4 in annual dividends has a 4% dividend yield. A higher yield can indicate a good income investment, but extremely high yields (above 8-10%) may signal that the market expects a dividend cut. Dividend yield changes daily as stock prices fluctuate. The average S&P 500 dividend yield has historically been around 2-3%.