How to Calculate Dividend Yield With a Formula

Team Veye | 17-Feb-2024 calculate dividend yield

In a very simple sense, it shows how much a company pays out in dividends relative to its stock price. Dividend yield provides an indicator of a company's financial health and allows you to compare which companies pay higher dividends per dollar you invest in.

A dividend is generally the amount of profit that a business gives to its shareholders. In addition to any increase in the stock's value, dividends are given to shareholders as compensation for owning stock in the company.

Let's now examine the dividend yield.

It is the proportion of dividends a company gives you for each dollar you invest, paid out annually. All you need to do to get a dividend yield is divide the share price by the annual dividends paid per share.

Dividends yield* = annual dividends paid per share / price per share

For instance, if a business paid out $7 dividends annually and its shares were currently valued at $160; its dividend yield would be 4.37%.

The yearly dividend yield of the company can be used as a useful metric to identify the stocks with the best returns. An increase in a company's dividend yield typically indicates to investors that the business is doing well because it can afford to distribute a larger portion of its profits to shareholders.

In established industries, the most stable companies typically offer higher dividend yields and consistent dividend payments. Rather than issuing dividends, expanding businesses typically reinvest their profits to support future expansion.

Reference: *All Data has been sourced from Company announcements and Refinitiv, Thomson Reuters

Frequently Asked Questions (F.A.Q)

Which are the top dividend stocks to look at?

As of YTD 6 February 2024, Yancoal Australia Limited had an annual dividend yield of 18.10%. As of YTD 6 February 2024, Zimplats Holdings Limited had an annual dividend yield of 12.81%. Additionally, Woodside Energy Group Limited has demonstrated a strong track record of dividend growth, as evidenced by its 10.60% annual dividend yield as of 6 February 2024.

Define the payout ratio.

In essence, it's a crucial financial indicator that's used to assess how long a company can continue to pay out dividends. It is the proportion of dividends paid to shareholders as a percentage of a company's overall net income. In general, businesses continue to have sound dividend policies from year to year.

Dividends or capital gains: which is a better choice for an investor?

Sometimes total returns are computed using dividend gains as well as stock appreciation, indicating a high yield on the net-gain growth of investments. An investor's main objective is for their investment to increase at a rate faster than inflation. Reputable ASX companies with strong earnings offer a superior return on equity in addition to paying out dividends.


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