The dividend yield (DY) is an indicator given by the ratio between the dividend of a share and its price on the market. It is a stock rate of return used in conjunction with other indicators to evaluate and compare a company. Generally, the higher the dividend yield, the better the company’s ability to return on invested capital. Be careful, because this is not an entirely positive dimension: by paying more dividends, you risk taking away investment capital from the company.
two types of dividend yields can be distinguished:
- trailing dividend yield - is the percentage of DY paid in a precise interval of time;
- forward dividend yield - is an estimate of the future yield of a security.
The dividend yield is one of the immediate return indicators of a company; however it should not be the only indicator investigated.
To learn more: “What is the dividend yield? Formula, definition, calculation and use”
