Definition
Dividend yield measures the income return from holding a stock. High yields are attractive for income investors but may signal a declining stock price or unsustainable payout. A yield significantly above the sector average warrants scrutiny of the payout ratio and earnings stability.
functions Formula
Dividend Yield = Annual Dividends Per Share / Price Per Share × 100%
lightbulb Example
A stock pays $3.00 annually and trades at $60. Yield = 5.0%. The S&P 500 average is ~1.5%, so this stock offers a significantly above-average income stream.
verified_user Key Points
- High yield can indicate value or distress—investigate further
- Payout ratio determines sustainability
- Dividend growth rate is equally important
- Qualified dividends receive preferential tax treatment