Online Calculators for Business & Investment
If you are an income investor in listed companies then there are few more important ratios than the Dividend Yield. The ratio gives a simple annual return on an investment based on the level of dividends.
It is widely used for investment comparison. This is because most investment returns are expressed as some sort of yield or percentage, whether it is property, bonds, bank savings, etc. What the Dividend Yield does is turn the return on an investment in a listed company into a yield which can be compared against every other alternative investment.
If you invest in companies to see a return based on capital growth then you may not be interested in the Dividend Yield. However many finance academics believe that dividends are the only ‘true’ return on a stock market investment. This is based on the idea of ‘efficient market hypothesis’ and the further that the idea that capital growth is based on pure chance and you are equally likely to see a stock price fall as it to rise. Therefore the dividends you receive from holding the stock are the only ‘true’ returns; and therefore dividend returns determine the ‘true value’. For people that hold these views, or for those who invest simply for income, then having the Dividend Yield to measure an annual return and to make comparisons is vital.
The Dividend Yield is expressed as a percentage. A result of 5.4% means that the annual dividend of the company is 5.4% of the stock price. Or expressed differently, if you purchase the stock today you will receive an annual return of 5.4% from dividends.
Dividend Yield Calculator
The calculator asks for:
Annual Dividends per Share, which is found via company announcements or the financial media and is the sum of all dividends throughout the year
Stock Price, which is found in the financial media or via your broker.