Dividend yield
Dividend yield is a stock's annual dividend per share divided by its price, and it measures the return you get purely from dividends, not counting price appreciation.
Dividend yield is calculated by dividing the annual dividend paid per share by the stock's current price. A dividend yield of 4%, for example, means that for every €100 invested in that stock at its current price, you'd receive roughly €4 a year in dividends, regardless of whether the stock's price rises or falls.
A high dividend yield isn't automatically a good sign: it can mean the company is generously distributing its profits, but it can also mean the stock's price has fallen sharply (which pushes the yield up even though the euro dividend hasn't changed), sometimes signaling that the company might cut that dividend soon. It's worth analyzing alongside the business's underlying performance rather than in isolation.
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Frequently asked questions
How is dividend yield calculated?
By dividing the annual dividend per share by the stock's current price, expressed as a percentage.
Is a high dividend yield always positive?
Not always: it can reflect a recent drop in the stock's price (which inflates the yield) rather than an especially generous dividend policy, and sometimes it signals a possible upcoming dividend cut.
Does dividend yield account for price appreciation?
No: it only measures the return coming from dividends. The total return of a stock investment also includes the price's rise or fall, which is calculated separately.