What is the Dividend Yield?
Definition: The Dividend Yield is a financial ratio for equities. The Dividend Yield shows the level of profit-distributions the company pays on a yearly basis in % of the current share price. With the Dividend Yield the investor is able to compare the dividend of different stocks.
How to calculate the Dividend Yield?
The Dividend Yield is calculated with this easy formula:
dividend payments per share
current share price
Important: if a company pays several dividends in a year you have to sum-up to the total amount of dividends per year. In order to have a up-to-date information about the dividend of a company, banks and brokers often use the expected dividend for the running business year to calculate the Dividend Yield.
The Nestlé Stock is at 63 Swiss-francs. Analysts expect a dividend of 2.05. What is the Dividend Yield?
2.05 / 63 = 0.0325 = 3.25% Dividend Yield for the Nestlé Stock
Use of the Dividend Yield
With the Dividend Yield the investor can compare the yield of the different dividends companies pay. The dividend is a important source of income for many investors. Therefore investors can chose stocks which pay a high dividend yield. High-Dividend-Stock are favored by income oriented investors and also funds and ETF's are available on stocks which pay a high dividend yield.