What is Dividend Yield?
Dividend yield is the annual dividend per share divided by the current stock price, expressed as a percentage. It measures how much cash income you receive relative to your investment.
Dividend Yield Explained
Dividend yield fluctuates with stock price — as price rises, yield falls, and vice versa. A very high yield (above 6-8%) can be a warning sign that the market expects the dividend to be cut. Comparing yield to the company's historical average and to competitors provides better insight than the absolute number.
Real-World Example
A stock trading at $100 pays $4 per share annually in dividends. The dividend yield is $4/$100 = 4%. If the stock drops to $80 and the dividend stays at $4, the yield rises to 5%. This higher yield might attract income investors, supporting the stock price.
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