What is a 'Forward Dividend Yield'
A forward dividend yield is an estimation of a year's dividend expressed as a percentage of current stock price. The year's projected dividend is measured by taking a stock's most recent actual dividend payment and annualizing it. Forward dividend yield is calculated by dividing a year's worth of future dividend payments by a stock's current share price.
BREAKING DOWN 'Forward Dividend Yield'
For example, if a company pays a Q1 dividend of 25 cents and you assume the company's dividend will be consistent, then the firm will be expected to pay $1.00 in dividends over the course of the year. If the stock price is $10, the forward dividend yield is 10%.
The opposite of a forward dividend yield is a trailing dividend yield, which shows a company's actual dividend payments relative to its share price over the previous 12 months. When future dividend payments are not predictable, trailing dividend yield can be a better measure of value. When future dividend payments are predictable or have been announced, forward dividend yield is a more accurate tool.