How to Calculate Dividend Yield (includes calculator)

By Stock Research Pro • November 4th, 2008

Dividend yield is a financial ratio that tells you how much a company pays in dividends each year relative to the price of the stock. Dividend yield offers a way to measure the cash flow you are getting for your investment.

Dividends are profits the company distributes to shareholders. Dividends typically don’t represent all of a company’s profits as the company usually retains some portion for future use.

Not all stocks pay dividends. Often a growing company can best benefit its shareholders by reinvesting its earnings in the business. A stock with no dividend might still be worth considering.

Dividend Yield = Dividend per Share / Share Price

The dividend yield on a company stock can be expressed as the company’s annual dividend payments divided by its market cap or the dividend per share divided by price per share. The dividend payments on preferred shares are outlined in the prospectus.

In the absence of any capital gains on the stock, the dividend yield reflects your return on investment. Investors who seek cash flow from their stock portfolio can ensure this by choosing relatively stable companies that offer dividends.

The Stock Research Pro Dividend Yield Calculator

(1) Enter the stock symbol
Search Yahoo Finance for the stock symbol if you don’t know it

(2) Enter the stock price

(3) Enter the dividend
The dividend information can be found under the Key Statistics in Yahoo Finance

The calculator then provides the output. You may print your results by clicking on the Print button.

Use the Update button any time you make changes to a calculation or click the Reset button to start over with a new calculation.

Historical Dividend Yield of the S&P 500

From the early part of the 20th century through about 1980, the average yield of the S&P 500 was between 3% and 6%. The trend in more recent years though is toward driving growth through retained earnings, bringing the yield on the index down to about 1.9%.

One way to factor dividend yield into your investment approach is through a Dogs of the Dow investment strategy.

More information on dividend yield


The above information and the associated calculator are educational and should not be interpreted as financial advice. For advice that is specific to your circumstances, you should consult a financial or tax advisor.

delicious | digg | reddit | facebook | technorati | stumbleupon | chatintamil

Leave a Comment

You must be logged in to post a comment.

« The Basics of IRA Investing | Home | The Different Types of Stock Market Orders »