Dividend Yield
Definition
A stock's annual dividend expressed as a percentage of its current share price.
Explanation
Dividend yield = annual dividends per share / price per share. A $100 stock paying $3 annually has a 3% yield. High yields can indicate value (mature companies returning cash) or distress (price has fallen, inflating the ratio). The 'yield trap' occurs when investors chase high yields without recognizing that the dividend may be unsustainable — dividend cuts typically cause stock prices to fall further. The S&P 500 average yield is approximately 1.5%, well below its historical average of 4%+ due to the shift from dividends to buybacks.
Formula
Dividend Yield = Annual Dividends Per Share / Price Per Share
How Stoquity Uses This
Stoquity incorporates dividend yield analysis across its portfolio management platform, providing real-time monitoring and AI-powered insights for every portfolio.