Dividend Yield
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The dividend yield is the sum company's annual dividends per share, divided by the current price per share. It is often expressed as a percentage. It the reciprocal of the price/dividend ratio. By investing in a company with a high dividend yield, investors can secure a relatively stable cash flow. However, it is important to note that sometimes dividend yields are high when a company is facing financial trouble, and the company may cut the dividend in the near future.
For example, if a stock trades at $36 and pays $1.80 in dividends over the course of one year ($.45 per quarter), the company's dividend yield is 5%.
Formula
Dividend Yield = Annual Dividends Per Share / Stock Price
YCharts calculates the dividend yield as the sum trailing twelve months of common dividends per share divided by the current price per share.
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Related Terms
Adjustable Rate Preferred Stock, Dividend, DRIP, Free Cash Flow Yield, Return, Yield
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