1. What is Dividend Yield?

Dividend Yield is a financial ratio that shows how much a company pays out in dividends each year relative to its stock price. It is expressed as a percentage and is a key metric for income investors.

2. How Does the Calculator Work?

The calculator uses the dividend yield formula:

Where:

• \( Dividend \) — Annual dividend per share ($)
• \( Price \) — Current stock price per share ($)

Explanation: The formula calculates the percentage return on investment from dividends alone, excluding capital gains.

3. Importance of Dividend Yield Calculation

Details: Dividend yield helps investors compare income-generating stocks, assess dividend sustainability, and make informed investment decisions based on income requirements.

4. Using the Calculator

Tips: Enter the annual dividend per share in dollars and the current stock price in dollars. Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is a good dividend yield?
A: A good dividend yield varies by industry and market conditions. Typically, 2-6% is considered reasonable, but extremely high yields may indicate risk.

Q2: Does dividend yield include capital gains?
A: No, dividend yield only measures the income return from dividends and does not include potential capital appreciation.

Q3: How often is dividend yield calculated?
A: Dividend yield is typically calculated annually based on the total dividends paid over the past year divided by the current stock price.

Q4: Can dividend yield change over time?
A: Yes, dividend yield changes as both dividend payments and stock prices fluctuate. A rising yield could indicate either increasing dividends or a falling stock price.

Q5: Is a higher dividend yield always better?
A: Not necessarily. While higher yields provide more income, they may also signal company distress or an unsustainable dividend policy that could lead to future cuts.