Investment Valuation Ratios: Dividend Yield
AAA
  1. Investment Valuation Ratios: Introduction
  2. Investment Valuation Ratios: Per Share Data
  3. Investment Valuation Ratios: Price/Book Value Ratio
  4. Investment Valuation Ratios: Price/Cash Flow Ratio
  5. Investment Valuation Ratios: Price/Earnings Ratio
  6. Investment Valuation Ratios: Price/Earnings To Growth Ratio
  7. Investment Valuation Ratios: Price/Sales Ratio
  8. Investment Valuation Ratios: Dividend Yield
  9. Investment Valuation Ratios: Enterprise Value Multiple

Investment Valuation Ratios: Dividend Yield

By Richard Loth (Contact | Biography)

A stock's dividend yield is expressed as an annual percentage and is calculated as the company's annual cash dividend per share divided by the current price of the stock. The dividend yield is found in the stock quotes of dividend-paying companies. Investors should note that stock quotes record the per share dollar amount of a company's latest quarterly declared dividend. This quarterly dollar amount is annualized and compared to the current stock price to generate the per annum dividend yield, which represents an expected return.

Income investors value a dividend-paying stock, while growth investors have little interest in dividends, preferring to capture large capital gains. Whatever your investing style, it is a matter of historical record that dividend-paying stocks have performed better than non-paying-dividend stocks over the long term.

Formula:


Components:


Zimmer Holdings does not pay a dividend, so the $1.00 dividend per share amount is being used for illustration purposes. In the company's stock quote the latest quarterly dividend would be recorded as $0.25 (per share) and the share price as $67.44 as of yearend 2005. On this basis, the stock would have a dividend yield of 1.48%.

Variations:
None

Commentary:
A stock's dividend yield depends on the nature of a company's business, its posture in the marketplace (value or growth oriented), its earnings and cash flow, and its dividend policy. For example, steady, mature businesses, such as utilities and banks, are generally good dividend payers. REIT stocks, with their relatively stable inflow of rental payments, are also recognized for their attractive dividend yields. If you're an income investor, a stock's dividend yield might well be the only valuation measurement that matters to you. On the other hand, if you're in the growth stock camp, dividend yield (or the lack of one) will be meaningless.

Investment Valuation Ratios: Enterprise Value Multiple

  1. Investment Valuation Ratios: Introduction
  2. Investment Valuation Ratios: Per Share Data
  3. Investment Valuation Ratios: Price/Book Value Ratio
  4. Investment Valuation Ratios: Price/Cash Flow Ratio
  5. Investment Valuation Ratios: Price/Earnings Ratio
  6. Investment Valuation Ratios: Price/Earnings To Growth Ratio
  7. Investment Valuation Ratios: Price/Sales Ratio
  8. Investment Valuation Ratios: Dividend Yield
  9. Investment Valuation Ratios: Enterprise Value Multiple
RELATED TERMS
  1. Earned Premium

    The amount of total premiums collected by an insurance company ...
  2. Insurance Regulatory Information System (IRIS)

    A collection of databases and tools used to analyze the financial ...
  3. Book Value Reduction

    Reducing the value at which an asset is carried on the books ...
  4. Deferred Tax Asset

    A deferred tax asset is an asset on a company's balance sheet ...
  5. Earnings Per Share - EPS

    The portion of a company's profit allocated to each outstanding ...
  6. Return On Investment - ROI

    A performance measure used to evaluate the efficiency of an investment ...
  1. What is the average price-to-earnings ratio in the oil & gas drilling sector?

    Investing in the energy sector provides an opportunity for value investors, but it is necessary to understand metrics such ...
  2. What assets are most risky and what assets are safest?

    Learn about the safest and riskiest assets to invest in. Explore savings accounts, T-bills, certificates of deposit, equities ...
  3. What are the most popular assets for investors?

    Learn about the most popular asset classes in the United States for different types of investors. Explore the risks and benefits ...
  4. What is considered a good PEG (price to earnings growth) ratio?

    Learn about the price/earnings to growth (PEG) ratio and understand what investors and market analysts consider a good ratio ...

You May Also Like

Related Tutorials
  1. Investing Basics

    Industry Handbook

  2. Bonds & Fixed Income

    Investing For Safety and Income Tutorial

  3. Fundamental Analysis

    Discounted Cash Flow Analysis

  4. Fundamental Analysis

    Ratio Analysis Tutorial

  5. Economics

    American Depositary Receipt Basics

Trading Center