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Metric · Payout

How to Calculate Dividend Yield

Dividend yield shows what percentage of a stock's current price a company pays out annually as dividends. It's one of the first metrics income-focused investors check.

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Updated 20266 min read
Formula
Dividend yield = (Dividend per share ÷ Share price) × 100
2.5–8%Attractive yield
< 2.5%Low yield
> 8%Possible dividend trap
Guideline values, industry-dependent, illustrative

The formula in detail

The components of the formula at a glance.

Numerator
Dividend per share
The annual dividend paid out per share.
Denominator
Share price
The current market price used to compute the yield.

Calculator

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Result dividend yield
Attractive yield
3.0 %
1
Values between roughly 2.5% and 8% are often considered attractive without already being a warning sign.
2
A very low yield (below 1%) is usually uninteresting for pure income strategies, but can be normal for growth companies.
3
An unusually high yield (above 8%) is often a so-called dividend trap: the price has fallen sharply, which mathematically inflates the yield. That's frequently a sign of fundamental problems rather than attractiveness.
4
It also matters whether the dividend is covered by genuine free cash flow rather than financed through debt or eroding the balance sheet.

Used in these strategies

Dividend Quality: 4 FactorsFour factors against the dividend trap: continuity, coverage, yield, growth.Dividend Aristocrats & ContinuityThe supreme discipline: years of uninterrupted dividend increases.

Frequently asked questions

An unusually high dividend yield that usually arises because the share price has fallen sharply. That's often a warning sign of fundamental problems rather than attractiveness.
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Not investment advice. This explanation is for informational purposes only and does not constitute a recommendation to buy or sell securities.

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