Dividend yield

A ratio compares the price the market puts on a stock to a measure of the business, such as its earnings, its assets, or its cash flow. It tells you how expensive a stock is relative to that measure, not just whether the share price is high or low in absolute terms.

Dividend yield divides the annual dividend paid per share by the current share price, expressed as a percentage. It shows the cash return an investor receives from dividends alone, separate from any change in the share price itself.

The formula is:

A high dividend yield can mean a generous payout, or it can mean the share price has fallen sharply while the dividend has not yet been cut, which would make the yield temporarily look more attractive than it really is. Dividend yield says nothing about whether the company can sustain that payout, which depends on its earnings and free cash flow.