Dividend Yield

Dividend Yield is a financial ratio that shows how much a company pays in dividends each year relative to its Stock price. It is expressed as a percentage and calculated using the formula:

Dividend Yield = (Annual Dividends Per Share / Price per Share) × 100

This metric helps investors understand the income generated from an investment in relation to its market price.

Examples:

1. If a company pays an annual dividend of $2 per share and its current stock price is $40, the dividend yield would be:

Dividend Yield = ($2 / $40) × 100 = 5%

2. If another company pays an annual dividend of $1.50 per share with a stock price of $15, the dividend yield would be:

Dividend Yield = ($1.50 / $15) × 100 = 10%

Cases:

Investors looking for income may prefer stocks with higher dividend yields, while those focused on growth may prioritize companies that reinvest profits rather than paying dividends.