Dividend Yield Calculator


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Calculate the profit you can earn from investing in stocks for dividends.

Are you new to stock trading and investment? If you are, your head is probably spinning from all the terminology you’ve been hearing and reading. One of these terminologies is the dividend yield.

The dividend yield is the percentage of a stock’s current share price that a company pays out as dividends each year. It gives you a clear view of the payout to expect from the stock on a quarterly or annual basis.

Read on to learn more about the dividend yield’s meaning and how you can use it to make the best investment decisions.

What Is the Dividend Yield?

The dividend yield is a metric that investors commonly use. It’s a ratio that indicates the proportion of a company’s current share price it pays out in dividends each year. If a stock’s dividend yield is high, this typically means that it’s an attractive investment.

In contrast, a stock with a low dividend yield isn’t usually one that investors will favor.

To get the most accurate portrayal of a stock using dividend yield, you should consider why the dividend yield is high or low. We’ll get into that in more detail later in this guide.

How to Calculate the Dividend Yield

Calculating a stock’s dividend yield is relatively simple. You can use the following formula to do it:

Dividend Yield = Annual Dividends Per Share / Current Share Price

Finding out the current share price of a stock is easy. All you need to do is search for the stock on a finance website using its designated code.

On the other hand, calculating the annual dividends per share can be tricky. This is another metric that indicates how much in dividends an investor can expect to receive for each share they own in a company.

To calculate the dividends per share, this is the formula to use:

DPS = Dividends / No. of Shares

For example, if you own shares in a company that has 1,000 outstanding shares and has paid out $50,000 in dividends over the past year, the DPS ratio will be $50 per share.

Then, plug this value into the dividend yield formula and divide it by the current share price.

If math isn’t your strong suit, you can skip all of this and use the dividend yield calculator offered by Calcopolis.

How to Interpret Dividend Yield

The dividend yield depends on two factors, the dividend per share and the current share price. Therefore, a high dividend yield doesn’t necessarily mean the dividend per share is high. It can also mean that the current share price is low.

Which of these situations is the case depends on the position of the company in question. Companies in a rapid growth phase generally don’t pay high dividends because they need the capital to fund their expanding operations. In turn, they generally have low dividend yields.

In contrast, a company that’s past the growth stage is likely to have a high dividend yield.

What Is a Good Dividend Yield?

To garner actionable insights from a company’s dividend yield, you should compare it with the dividend yields of other companies in the same industry. Cross-industry comparison isn’t very useful since the average dividend yield is significantly different from one industry to another.

Here’s the average dividend yield across some industries:

  • Communications: 0.94%
  • Energy: 3.93%
  • Healthcare: 1.66%
  • Real Estate: 2.99%
  • Information Technology: 1.09%

Should I Pick Stock With High Dividend Yields?

The decision of whether to invest in stocks with high or low dividend yields should be based on your specific situation.

Take into account your investment strategy and priorities. Additionally, you should keep in mind that high dividend yields can often mean low share prices if you intend to flip your stocks for a profit. High dividend yield stocks aren’t the best option.

On the other hand, if dividends are your primary source of income, then you should go for stocks with high dividend yields.

However, keep in mind that a stock’s dividend yield isn’t set in stone. It can fluctuate over time depending on several factors, including the industry’s current trend.

Conclusion

The dividend yield is a highly useful KPI to use when deciding on the viability of a stock. After all, you’ve worked hard for your money. In turn, you should make investments that give you a high return on your cash.

The Calcopolis dividend yield calculator allows you to easily find out this metric for any stock and aids you in making the right decisions.


Authors

Created by Lucas Krysiak on 2023-04-21 12:57:47 | Last review by Mike Kozminsky on 2023-04-21 14:07:10

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