Dividend yield
Dividend yield is the annual dividend a share pays divided by its price. It expresses the cash return a shareholder receives at the current price. An unusually high yield is usually the result of a falling price rather than a rising dividend, and deserves checking before it is read as a good sign.
How it is calculated
Dividend yield = annual dividend per share ÷ share price. A company paying 1.20 € a year and trading at 24 € yields 1.20 ÷ 24 = 5 %. You have to check which dividend is being used: the last twelve months actually paid is a fact; the estimate for the next twelve is a forecast, and both figures circulate under the same name. The second check is the payout ratio, the share of earnings going out as dividend: a 5 % backed by a 40 % payout and a 5 % backed by a 110 % payout are not the same 5 %.
The figures in the example are invented and rounded so the arithmetic can be redone by hand. They are not data from any real company.
What it is NOT
It is not an interest rate and it is not guaranteed. The dividend is decided by the board each year and can be cut or scrapped. And there is an arithmetic trap: the price sits in the denominator, so the yield rises when the share falls. A dividend yield that suddenly goes from 4 % to 9 % is almost never an opportunity; it is usually the market pricing in that the dividend is about to be cut.
Formula
Rentabilidad = dividendo anual ÷ precio See also
Explained in depth
See it on real data
Celsmar computes this from the accounts companies file with their regulator, and shows which line every figure comes from. Free to start, no card.
Definition for informational purposes. It is not financial advice nor a recommendation to buy or sell.