Find a stock's dividend yield from its annual dividend per share and current price.
Dividend yield is annual dividend per share divided by the current share price, expressed as a percentage. Because the price sits in the denominator, the yield moves whenever the price moves, even if the company has not changed its dividend at all. A yield that has risen sharply is often a sign the share price has fallen rather than that the payout has improved, which is the opposite of what the headline number suggests.
That is the trap worth knowing about. An unusually high yield frequently signals that the market expects the dividend to be cut, and a cut is normally followed by a further fall in the price. Two checks help: the payout ratio, which is the proportion of earnings being paid out, where anything approaching or exceeding 100 per cent is hard to sustain; and the dividend history, since a company that has maintained or grown its payout across several years is telling you something different from one whose yield has just spiked.
No. Because yield rises when the price falls, an unusually high yield often reflects a falling share price and market doubt about whether the dividend can be maintained. Yield is a starting point for investigation, not a ranking.
Yield counts only the dividend. Total return combines dividends with any change in the share price, and it is the figure that reflects what actually happened to your money. A share can pay a 6 per cent yield and still lose you money overall.
It varies by sector, but a ratio comfortably below 100 per cent leaves room to keep paying through a weaker year. Utilities and mature businesses sustain higher ratios than growth companies, which often pay little or nothing and reinvest instead.
Since the 2020 change, dividends are taxed in the investor’s hands at their applicable slab rate rather than through a dividend distribution tax paid by the company. Tax deducted at source may apply above a threshold. Rules change, so confirm the current position before relying on it.