Dividends · updated October 21, 2026
What is dividend yield and how is it calculated
Dividend yield shows what percentage of the share price you get back each year as a dividend. A 5% yield means $5 a year for every $100 invested, if the dividend stays the same.
Dividend yield formula
- Dividends per share
- The amount paid per share over the last year (all payments).
- Share price
- The latest price on the exchange.
Worked example
A stock costs $50 and the company paid $2.50 of dividends per share last year.
For $1,000 invested you get $50 a year, before tax.
How to read dividend yield
A very high yield often shows up after the share price has fallen a lot. Sometimes the market expects the dividend to be cut.
When dividend yield can fool you
Special dividends: a one-time payment inflates the yield for a year. The price adjusts: on the ex-dividend date, the share price drops by roughly the dividend amount.
Related terms
Questions about dividend yield
What is a good dividend yield?
Between 3% and 6% is a good level if the dividend is covered by profit and grows over time. Above 8%, there is usually a risk.
Is the yield paid out of the share price?
No. The dividend comes from the company's profit. But on the ex-dividend date the price drops by roughly the amount paid.
These explanations are for information only. They are not a recommendation to buy or sell.
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