Definition of Dividend Yield
The dividend yield is the percentage of return on a share. It is calculated by dividing the annual dividend per share divided by the current price of a share. It is a relative measure in percentage.
Example of Dividend Yield:
Apple Inc. paid an annual dividend of $27.00 per share and its stock is trading at $423.00. This means the dividend yield for Apple Inc. will be:
Dividend yield = $27.00 / $423.00 = 6.38%
The dividend yield is an important measure for investors to assess the return a stock can provide. Since the dividend is paid as per the dividend policy of a company so it is better to check the dividend payout ratio and also the annual growth in dividend payments.