Chicks, Chat and Change Financial Terminology 101 – Dividend Yield
Welcome back to Financial Terminology 101. I am Ann Zuraw.
Today we are going to talk about what a Dividend Yield means. A Dividend Yield is the total amount of income you can potentially earn on an investment each year based on a percentage of what you spent to buy each share.
To calculate the dividend yield potential, all you need to do is divide the annual dividend by the current stock price. For example, a cake company shares are trading for $10 per share and they are paying a total of $1 per share a year in dividends.
All you need to do is divide the annual dividend of $1 into the current stock price of $10 per share and this will equal a dividend yield of 10%.
This would mean that right now, an investor would have the potential to earn 10% back yearly on their investment for each $10 dollars they invest.
Dividends are not guaranteed and the dividend yield may fluctuate.
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