Formula

Dividend Yield = Dividend per share/Current Share Price X 100

Description

Dividend Yield shows the percentage of dividend per share over current share price.This formula uses to measure percentage of dividend distributed by the company and helps to identify high dividend companies. Companies that has high dividend yield are high dividend companies.Naturally, high dividend companies have higher resistant on share price decreasing when market downturn.Although this is an mutual understanding by public, but it does not mean that high dividend companies are always good companies and vice versa.Some companies focus on company growth and capital return. Hence, this kind of company seldom distributes dividend and retains their profit for company expansion and development.To conclude, dividend yield can use as one of the financial indicator for company but it is not the only one. It needs to use together with other financial indicator. It basically helps you to understand a company dividend's strategy.

Example

If Company A distribute 10% or 10 sen per sen dividend and current share price for company A is $2.00,
Dividend Yield = Dividend per share / Current Share Price X 100 = 10 / 200 X 100 =5 %
In this case, it shows that the investor will get 5% of dividend on the amount invested.If the investor invest $1000 in this company, the investor will get $50 dividend.

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