Glossary · Defined term
Dividend yield
Dividend yield is a stock's annual dividend payments divided by its share price, expressed as a percentage.
Last updated Oct 2, 2026
What it means
Dividend yield is a stock's annual dividend payments divided by its current share price, expressed as a percentage. It tells an investor how much cash income each dollar invested would generate over a year, ignoring any change in the share price. A stock paying $2 a year in dividends at a $50 share price has a 4 percent yield. Yields move inversely with price: if the price falls while the dividend holds, the yield rises, which is why very high yields can signal trouble rather than opportunity. Trailing yield uses dividends already paid; forward yield uses the announced or expected payout.
An example
For illustration, a company pays a quarterly dividend of 50 cents, or $2 annually, and its shares trade at $40, giving a 5 percent dividend yield. If the company later cuts the dividend to $1 while the price stays at $40, the yield drops to 2.5 percent. The yield describes income, not total return.