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Dividend yield tells you how much income a stock pays relative to its price — the annual dividend as a percentage of what you pay for the share. It's the key number for income investors comparing stocks: a higher yield means more cash return per dollar invested, though it must always be weighed against the company's stability.
Enter the dividend per share, the share price and how many shares you hold, and the yield plus your total dividend income appear at once.
How is it calculated?
The calculation
Dividend yield = dividend per share ÷ share price × 100. A stock paying 5 per share, priced at 100, yields 5 ÷ 100 = 5%. Your total income is the dividend per share × the number of shares you own — 5 × 100 shares = 500 a year.
Yield moves opposite to price
Because price is the denominator, yield rises when the share price falls (and vice versa), even if the dividend is unchanged. A very high yield can therefore be a warning sign — it may reflect a falling price on a struggling company, not generous payouts. Always check whether the dividend is sustainable.
Gross vs net income
Dividends are often taxed. This tool shows the gross yield and income; depending on your country a withholding tax may reduce what you actually receive. Factor in your local dividend tax to get the net figure.
Yield vs total return
Yield is only the income part. Your total return also includes capital gains (or losses) from the share price changing. A modest-yield stock that grows in price can outperform a high-yield stock that stagnates. Use yield to assess income, not the whole investment.
Where it helps
- Comparing the income of dividend-paying stocks
- Estimating annual cash income from a holding
- Judging whether a yield is attractive or a red flag
Worked example
A stock pays a dividend of 5 per share and trades at 100, so the dividend yield is 5 ÷ 100 = 5%. If you hold 100 shares, your annual dividend income is 5 × 100 = 500 (gross). Now suppose the share price falls to 80 while the dividend stays at 5 — the yield jumps to 5 ÷ 80 = 6.25%. That higher yield isn't necessarily good news: it's driven by the falling price, which is why an unusually high yield is worth investigating rather than chasing.
FAQ
How is dividend yield calculated?+
Dividend yield = annual dividend per share ÷ share price × 100. A 5 dividend on a 100 share is a 5% yield. Your total income is the dividend per share times the number of shares you hold.
Is a higher dividend yield always better?+
Not necessarily. Because yield rises as price falls, a very high yield can signal a struggling company rather than generous payouts. Check whether the dividend is sustainable before chasing yield.
How much dividend income will I receive?+
Multiply the dividend per share by the number of shares you own: 5 per share × 100 shares = 500 a year (gross, before any dividend tax).
Why does yield go up when the price goes down?+
The share price is the denominator. If the dividend stays fixed and the price falls, the same dividend is a larger percentage of a smaller price, so the yield rises.
Is dividend income taxed?+
Usually yes — many countries apply a withholding or income tax to dividends. This tool shows the gross figure; subtract your local dividend tax to find the net income you keep.
What is the difference between yield and total return?+
Yield is only the income component. Total return also includes capital gains or losses from the share price moving. A lower-yield stock that appreciates can beat a high-yield stock that doesn't.