What is Dividend Yield?
Dividend Yield shows annual dividends as percentage of stock price. It's the cash return you get just for holding the stock.
Think of it like this
A rental property costs $200,000 and pays $10,000/year rent. That's a 5% yield. Similarly, a $50 stock paying $2/year dividends has a 4% yield.
Formula
Dividend Yield = Annual Dividend / Stock Price- Annual Dividend: Total dividends paid per share per year
- Stock Price: Current stock price
Why it matters
- Provides income while you hold
- Sign of profitable, mature company
- Cushions against price drops
- Tax-advantaged income for many
What's a good value?
0%
No Dividend
Growth company reinvesting profits
0-2%
Low
Some income, focus on growth
2-4%
Moderate
Good balance of income and growth
> 4%
High
Strong income, but verify sustainability
> 8%
Very High
Possibly unsustainable or risky
Real-world example
AT&T: 7% yield - high income. Apple: 0.5% - focuses on growth. REITs: 4-8% - required to pay dividends. Troubled company: 12% yield - dividend cut likely.
Things to watch out for
- High yield might signal problems
- Dividends can be cut
- Yield rises when price falls
- Total return includes price appreciation
Screen US stocks by Dividend Yield in the app, and see which companies pass right now.