Dividend Yield / Current Yield : Meaning, Formula and Example

The dividend yield, also known as current yield, is a measure of an investment’s return. The higher the dividend yield, the higher the return on the investment. Typically, only profitable companies pay out dividends; therefore, investors often view companies that have paid out significant dividends in the past are considered as a less risky investment. Because of their consistent profit.

Formula for Dividend Yield / Current Yield

\(Dividend\,Yield/\,Current\,Yield = \frac{{Dividend\,per\,share}}{{Price\,per\,share}}\)

Example

ABC Company has paid out a dividend per share in the amount of Rs.15 and has a share price at the end of the year in the amount of Rs.1125 per share. This gives a dividend yield in the amount of 1.33%, which means that the investor has earned 1.33% return if he has paid Rs.1125 for each share purchased.

Dividend payout ratio can also be calculated by dividing dividends with net income.

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Author and Assistant Professor in Finance, Ardent fan of Arsenal FC. Always believe "The only good is knowledge and the only evil is ignorance - Socrates"
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