Dividend Yield — Stock Market Glossary
Dividend Yield
Dividend yield is the annual dividend payment expressed as a percentage of the current stock price. It tells you how much income you receive per dollar invested in a stock.
Formula
Dividend Yield = (Annual Dividend Per Share ÷ Stock Price) × 100
Example: A stock trading at $50 that pays $2.00 per year in dividends has a dividend yield of 4.0%.
How to Interpret Dividend Yield
| Yield | Typical Interpretation |
|---|---|
| 0% | No dividend; company reinvests all earnings |
| 1–2% | Low yield; common for growth-focused companies |
| 2–4% | Moderate yield; typical for stable large-caps |
| 4–6% | High yield; attracts income investors |
| > 6% | Very high yield; may signal dividend risk (see below) |
The Dividend Yield Trap
A very high yield (> 6–8%) can be a warning sign. Yield goes up when the stock price falls. If a stock’s dividend yield suddenly looks extraordinarily attractive, it may mean the market is pricing in a dividend cut — the company pays out less than expected, and yield collapses back to normal.
How It’s Used on This Site
Dividend yield is the primary metric in the 💰 Dividend Daddy strategy, which targets stocks with:
- Above-average dividend yield
- Low beta (stable price, less likely to cut dividend)
High-yield stocks score significantly better in Dividend Daddy. Browse all tickers and sort by dividend yield to find income candidates.
Related Terms
- Beta — Stability matters for dividend reliability
- P/E Ratio — Earnings coverage of dividends
- Market Capitalization — Large-caps tend to have more reliable dividends
Data on this site is for educational purposes only and does not constitute financial advice.