What Is a Stock Yield?

A stock yield is the annual dividend as a percentage of the price of the stock. If a stock sells at $30 a share with an annual dividend of $3, it yields 10 percent.

Function

The function of finding the dividend yield helps determine whether a stock is a good price. The more money the company makes, the higher the dividend.

Identification

The yield of the stock is determined by dividing the annual dividend for one stock by the price of one share of that stock. If you own the stock, use the price you paid for it.

Features

Another way to make money on a stock is via the increase in the share price. If buying stock when the price is high, the yield will be lower than that of the person who bought the stock at a lower price. If the yield is high, the price of the stock may have been low.

Significance

Many people buy stock with a high dividend to use as income for retirement. Often when interest rates are low, the stock market is also. This means that dividend yields are abnormally high and they get a higher return on their dollar.

Effects

Dividends are part of the total return of a stock. Normally high dividend-bearing stocks increase in price when interest rates are low.

Considerations

Getting a dividend yield on a stock has an additional benefit--the potential for the stock to grow.