How to Calculate Dividend Yield

Dividend yield is an important concept in investing; it tells you how much a company pays out in dividends, relative to the price of its shares. Knowing the dividend yield of your shares helps you understand the cash flow you're receiving from them.

Instructions

Difficulty: Moderately Easy

Things You’ll Need:

• Stock price
• Dividend amount
• Calculator

1. The first information you need is the price of the company's stock. This can be found online at Yahoo! Finance. Enter your stock's ticker symbol at the top of the page, or search for the name of the company. Once you've found it, look for the words "Last Trade" -- this is the price the stock is currently fetching. For example, at the time of writing, Microsoft stock (MSFT) last traded at $28.23.
2. Now you need to know what the dividend payout is. This is also found on Yahoo! Finance under "Div & Yield." At the time of writing, Microsoft's dividend was $0.44, or 44 cents per share of stock.
3. Now, to find the dividend yield, you divide the dividends per share by the price per share. In this case, that would be $0.44 by $28.23. This comes out to 0.01558; move the decimal point two places to the right, and you get 1.6%.
4. To interpret the number you end up with, keep in mind that stocks with dividend yields of greater than 4% are generally considered "high dividend payers" -- but many things can influence dividend yield, and it's certainly not the only criterion you should use in investing.