Forward Dividend Yield

Forward Dividend Yield refers to the expected annual Dividend Payments from a Stock, expressed as a percentage of its current market price. It is calculated by dividing the estimated annual Dividends Per Share by the current Share price. This metric helps investors assess the potential income generated from a stock investment relative to its price.

Formula: Forward Dividend Yield = (Estimated Annual Dividends per Share / Current Share Price) x 100

Example 1: If a company expects to pay a dividend of $2 per share in the next year and its current share price is $40, the forward dividend yield would be:

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

Example 2: If another company anticipates an annual dividend of $1.50 per share, with a current stock price of $30, the forward dividend yield would be:

Forward Dividend Yield = ($1.50 / $30) x 100 = 5%

Use Case: Investors looking for income-generating stocks often use forward dividend yield to compare potential investments. A higher yield might indicate a more attractive investment opportunity, but it’s essential to consider other factors, such as the company’s financial health and dividend Sustainability.