Dividend Yield

Dividend yield measures how much cash income you receive relative to the price you pay for a stock. It's expressed as a percentage and is crucial for income-focused investors.

Formula: Dividend Yield = (Annual Dividend per Share / Stock Price) × 100

Example:

• Stock price: $100
• Annual dividend: $4 per share
• Dividend yield: 4%

Interpreting Dividend Yield:

Low Yield (<2%):

• Growth-focused companies reinvesting profits
• Examples: Tech stocks (AMZN, GOOG)

Moderate Yield (2-4%):

• Balanced growth and income
• Examples: Many S&P 500 companies

High Yield (4-6%):

• Mature, stable businesses
• Examples: Utilities, REITs, telecoms

Very High Yield (>6%):

• ⚠️ May signal trouble (dividend cut risk)
• Or: High-yield sectors (MLPs, mREITs)

Important Considerations:

• Yield changes daily with stock price
• High yield can indicate falling stock price
• Focus on dividend growth, not just current yield
• Check payout ratio for sustainability

Dividend Yield vs. Dividend Growth:

• High yield now vs. growing yield over time
• Example: 2% yield growing 10%/year beats stagnant 4% yield