What is dividend yield
Updated on June 30, 2026 · by Rafael Rossi
Dividend yield (DY) measures how much a stock (or REIT) pays in dividends per year relative to its price. It's the favorite metric of income-focused investors.
The formula
DY = annual dividend per share ÷ share price × 100
A $30 stock paying $2.40/year has a DY of 2.40 ÷ 30 = 8%.
The income it generates
Multiply the DY by the amount invested. $10,000 at 8% earns $800/year in dividends — about $67/month, on top of the stock's own gain or loss.
Beware a DY that's too high
A yield far above average can be a trap: since price is in the denominator, a sharp price drop (a struggling company) inflates the DY. It can also reflect a one-off dividend. Look at payment history and consistency, not just today's number.
DY isn't everything
A company paying big dividends may be reinvesting little in growth. Judge DY alongside financial health, payout ratio and business outlook.
FAQ
Does DY look at the past or future? The common DY uses dividends already paid (trailing 12 months). It doesn't guarantee future payments.
Yield or growth? High-yield stocks pay now; growth stocks reinvest for later. Many portfolios mix both.