Dividend Yield
What percent of the share price a year of dividends is — the annual return you earn from dividends by holding the stock.
In plain terms
If a stock priced at $100 pays $3 a year in dividends, the dividend yield is 3%.
Like bank interest, it shows "what percent a year you receive in dividends from holding this stock, even if the price does not rise." So it is a key yardstick for income-focused investors.
What it tells you
It lets you gauge the cash income that comes in just from holding, separate from the price going up or down.
It is often compared with market interest rates (deposits, bonds). When the dividend yield is higher than rates, dividend stocks are seen as more attractive.
Formula
Dividend yield = annual dividend per share ÷ current share price × 100
What high or low means
A high dividend yield means the stock pays a lot in dividends relative to its price.
But the yield can look high because the price fell, not because the dividend was raised — so high is not automatically good.
If the dividend yield jumped suddenly, it may be because the share price crashed rather than the company raising its dividend (the denominator, price, shrank). That can also be a warning sign of an imminent dividend cut.
Check whether the dividend is covered by free cash flow (FCF) and not funded by borrowing, to know whether it can continue.
Growth companies often deliberately pay no dividend and reinvest in the business. A low dividend yield does not mean a bad company.
General Electric (GE) was a flagship US dividend stock that paid dividends for over 100 years. Then in the 2009 financial crisis it cut the dividend to about a third, and as its business collapsed in 2017–2018 it slashed the dividend all the way to about one cent.
Investors who trusted GE as "stable" based on its dividend alone were badly shocked. It shows that however high the dividend yield looks, you have to read it with whether the company earns enough to pay it (profit and free cash flow). A dividend is not a guaranteed promise — it can be cut as the company's situation changes.
Metrics to read alongside
See it in real stocks
Search US stocks on Stocklore to see Dividend and other financial metrics alongside the sector average.
This explanation is for information and reference only and is not a recommendation to buy or sell any security. Investment decisions and their consequences are your own.