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.
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%.
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.
The portion of a company's profit allocated to each outstanding ...
A performance measure used to evaluate the efficiency of an investment ...
This ratio indicates whether a company has enough short term ...
An announcement by an investor who holds a security that he or ...
The difference between the present value of cash inflows and ...
An indicator that measures the total amount of debt in a company’s ...
Find out how to calculate the current ratio and what that result can tell you about a potential investment.
The best way to answer this question is to provide a simple illustration of what happens when a company increases the number ...
As with most matters related to generally accepted accounting principles (GAAP), accountants assigned with the task of applying ...
The compound annual growth rate (CAGR) measures the return on an investment over a certain period of time. Below is an overview ...