How finance folk use it
Dividend yield is the amount of dividends a company pays out each year relative to its stocks, and is expressed as a percentage. It is one of the factors you can look at to help you decide if you want to purchase shares of that company.
To calculate dividend yield, divide the cash dividends per share by the buying price per share, then multiply the result by 100.
For example, if a company paid P5 dividend per share, and these shares were trading for P100, its dividend yield would be 5% (5/100 x 100).
Is it good or bad?
A high dividend yield can be a sign that a company’s business is doing well enough that it can reward its stockholders with dividends. However, this isn’t always the case.
You may see a satisfactory dividend yield from a company whose stock price has remained fairly consistent, but you might also find the same yield from a different company whose share prices are going down.
The latter may not be right for your investing needs, because there is a significant chance that its stocks will actually be worth less in the near future.
What it means for you
Don’t forget that the dividend yield is only one thing to consider before deciding if you want to purchase stocks of a company. You should also be checking factors like the price movement of the shares, and the company’s performance and growth prospects, too.
