How to Calculate Dividend Yield

Dividend Yield (or the dividend-price ratio) indicates what percentage return a company pays out in the form of dividends. The higher the per share price, the lower the dividend yield and this may indicate an over-priced stock.

Learn how to calculate dividend yield with the following examples:

Example 1:
If you purchased a stock at $8 and received a dividend of $0.12 on it, then:
Dividend Yield Ratio = (Dividend Per Share / Market Price Per Share) * 100% = (0.12 / 8) * 100% = 1.5%

Example 2:
CFA Ltd has the following information:
Ordinary share dividend $30,000
Preference share dividend $25,000
Ordinary shares of $0.50 each: $20,000
Preference shares of $0.50 each: $10,000
Retained earnings $21,000
Share premium $18,000
The market price per ordinary share is $2.00.

Solution:
Number of ordinary shares = 20,000 / 0.50 = 40,000
Dividend Per Share = 30,000 / 40,000 = $0.75
Dividend Yield = (0.75 / 2.00) * 100% = 37.5%

* Next: How to Calculate Dividend Cover Ratio
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