Summary
Dividend Yield measures the dividend paid by a company as a percentage of its current share price. It shows how much income an investor may receive relative to the price of the share.
This is one of the most commonly used measures for income-focused investors.
Why it matters
Dividend Yield helps investors compare the income potential of different shares. It can also be compared with bond yields, deposit rates, or other income-generating investments.
However, a high yield does not automatically mean a better investment.
How it is calculated
Dividend Yield = Dividend per Share ÷ Market Price × 100
How to read it
A higher Dividend Yield may indicate stronger income potential. However, it may also result from a falling share price, which can signal investor concern or weaker company performance.
A lower Dividend Yield may indicate lower income, but it may also reflect stronger share price performance or a company that reinvests more earnings for growth.
Things to keep in mind
Dividend Yield should be reviewed together with payout ratio, cash flow, profitability, and dividend history. Extremely high yields should be examined carefully to assess whether the dividend is sustainable.