How to Do a Dividend Yield Calculation

Calculating dividend yields

One way to determine if a stock would be a wise investment is to perform a dividend yield calculation. Essentially, the dividend yield is the ratio that indicates the return on an investment or the amount a company pays stockholders each year in relation to its share price. The dividend yield calculation is helpful to investors who wish to compare the value of stocks, especially those who are seeking income from dividends.

Instructions

1. Find the annual dividend per share. This figure represents the sum of money paid to shareholders of a corporation from earnings.

2. Find the price per share of your stock. Check the current price at various websites.

3. Use a calculator to determine the annual yield calculation by taking the annual dividend per share and dividing it by the stock's price per share. For example, if the ACME Widget Company's annual dividend is $1.75 and the stock trades at $27, then the dividend yield is about 6 percent.

Tips & Warnings

• There are several websites that enable consumers to perform a dividend yield calculation for free. Perform a web search using the key words such as dividend, yield or calculator.

• Use stock screens offered at investment service websites to help find companies that pay high dividend yields.

• Remember that dividend yield will fluctuate based on the price per share. If the price per share decreases, and the previous annual dividend does not change, the yield increases.

• Never use the dividend yield calculation as the sole measure of evaluation.

References

• Wikipedia: Dividend Yield Calculation

Resources

• Read this Article in Spanish