What is dividend yield and how is it calculated?

Dividend yield is the annual dividend income expressed as a percentage of the current stock price. Formula: Dividend Yield = (Annual Dividend Per Share ÷ Current Stock Price) × 100. For example, a stock priced at $50 that pays $2.50 annually has a yield of 5%. It tells you how much you earn in dividends relative to what you pay for the stock.

Is a high dividend yield always better?

Not necessarily. An unusually high yield can be a warning sign — it may indicate that the stock price has fallen sharply due to business problems, or that the dividend is unsustainable and likely to be cut. A healthy dividend yield is one that is covered by earnings (payout ratio below 70%) and growing consistently. Always check the dividend history and payout ratio alongside the yield.

What is the difference between dividend yield and dividend payout ratio?

Dividend yield compares the dividend to the stock price — it is an investor metric that tells you your income as a percentage of cost. The payout ratio compares the dividend to the company's earnings per share (EPS) — it is a company metric that tells you what fraction of earnings is being distributed. A low payout ratio (below 60%) generally means the dividend is sustainable and has room to grow.

Dividend Yield Calculator

Current yield, yield on cost, and projected income at a given holding size.

Dividend Yield Calculator

Stock Price / Share

Annual Dividend / Share

Shares Held

Payout Frequency

Dividend Yield

5.00%

Annual Income

2,500

Monthly Income

208.33

Per Quarterly Payment

6.25

At the current yield, dividends will recover your 50,000 investment in 20.0 years — assuming a constant dividend rate.

Annual Income

Monthly Income

100

2,500

208.33

200

5,000

416.67

500

12,500

1,041.67

1,000

25,000

2,083.33

Current yield and yield on cost

Two different questions. Current yield tells you what a new investment would earn; yield on cost tells you what yours earns.

current yield = annual dividend ÷ current price × 100 yield on cost = annual dividend ÷ your purchase price × 100

annual dividend: Total dividends per share over a year
current price: Market price now
your purchase price: What you actually paid per share

Worked example

Annual dividend: 4.00 per share
Bought at: 50.00
Current price: 80.00

Current yield 5.0% · Yield on cost 8.0%

Yield on cost is a satisfying number and not a decision-making one — it tells you about a past purchase. When deciding whether to buy more or hold, current yield is what matters, because that is the return available on capital today.

A very high yield is usually a warning

Yield is dividend divided by price. It rises when the dividend rises — or when the price falls. The second is far more common at the top of a yield screen.

A stock yielding 12% when its sector averages 3% is generally telling you the market expects the dividend to be cut. When it is, the yield "normalises" by the dividend falling, and holders are left with a lower income and a capital loss. This is the classic value trap.

Things to check before treating a high yield as an opportunity: is the payout ratio sustainable (dividends as a share of earnings, or better, of free cash flow)? Has the dividend been cut before? Is the price fall explained by a specific, temporary problem? And is the company borrowing to pay the dividend, which is visible in the cash flow statement and is never sustainable.

About

The Dividend Yield Calculator measures how much cash flow you receive relative to the price you paid for a stock. A high yield signals strong income relative to cost, but should be compared against payout sustainability. This tool lets you enter the current stock price and annual dividend per share to compute the yield, then model your total annual and monthly dividend income based on how many shares you hold or plan to buy.

How to use

1 Enter the current stock price per share.
2 Enter the annual dividend per share (or quarterly dividend × 4).
3 The dividend yield is calculated instantly as a percentage.
4 Enter the number of shares you hold (or plan to buy) to see projected annual income.
5 Use the comparison table to model different share quantities or price points.

What is dividend yield and how is it calculated?: Dividend yield is the annual dividend income expressed as a percentage of the current stock price. Formula: Dividend Yield = (Annual Dividend Per Share ÷ Current Stock Price) × 100. For example, a stock priced at $50 that pays $2.50 annually has a yield of 5%. It tells you how much you earn in dividends relative to what you pay for the stock.
Is a high dividend yield always better?: Not necessarily. An unusually high yield can be a warning sign — it may indicate that the stock price has fallen sharply due to business problems, or that the dividend is unsustainable and likely to be cut. A healthy dividend yield is one that is covered by earnings (payout ratio below 70%) and growing consistently. Always check the dividend history and payout ratio alongside the yield.
What is the difference between dividend yield and dividend payout ratio?: Dividend yield compares the dividend to the stock price — it is an investor metric that tells you your income as a percentage of cost. The payout ratio compares the dividend to the company's earnings per share (EPS) — it is a company metric that tells you what fraction of earnings is being distributed. A low payout ratio (below 60%) generally means the dividend is sustainable and has room to grow.

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