Dividend Yield

The annual dividend payment divided by the stock price, expressed as a percentage.

What Is Dividend Yield?

The dividend yield tells you how much income you'll earn per dollar invested in a stock. It's calculated by dividing the annual dividend payment by the current stock price.

Dividend Yield = Annual Dividend Per Share ÷ Stock Price × 100

What's a Good Dividend Yield?

A "good" yield depends on the context. The S&P 500 average is around 1.5-2%. Utility companies and REITs often yield 3-5%. Be cautious of extremely high yields (8%+) — they can signal that the market expects a dividend cut, which has driven the stock price down and inflated the yield.

The Dividend Trap

A stock with a high dividend yield isn't automatically a good investment. If the company's business is deteriorating, it may be forced to cut the dividend — causing the stock to drop further. Always check the payout ratio (dividends ÷ earnings) to see if the dividend is sustainable. A payout ratio above 80% is a warning sign.