How to Calculate the Dividend Yield

The dividend yield is often listed in a stock quote. It lists information on how much of the stock is given out in dividends during an entire year. This reflects on how a business is thriving and if it is capable of paying the money to the investors. The process for determining the dividend yield is not difficult.

1. Take the total amount of dividends that were paid to the shareholders over the past year.
2. Divide that total by the current share price.
3. Calculate that amount as a percentage (divide by 100).

For instance, a stock trading at $30 might have given out $2 in dividends last year. Dividing 2 by 30 equals 0.066. Multiply by 100 equals the dividend yield of 6.6%. This is a valuable number, but it could also be misleading. You might see that a stock has a dividend yield of 4%, but it is still worth $100. This means people only received $4 in dividends in the past year.

Meanwhile, a stock with a dividend yield of 40% might be worth $10. This also means that the investors would have received $4 in dividends in that same time period. The key point is that a stock with a higher dividend yield is not always going to give you more. Review this total when looking at a stock to see how the dividend yield works alongside the stock value so you can get a decent idea of what you might earn from the stock.