Legal Definitions - dividend yield

Definition: Dividend yield is a financial ratio that measures the amount of dividends paid out to shareholders relative to the current market price of the stock. It is calculated by dividing the annual dividend per share by the market price per share.

Example: If a company pays an annual dividend of $2 per share and the current market price of the stock is $50 per share, the dividend yield would be 4% ($2/$50).

Another example would be if a company pays an annual dividend of $1.50 per share and the current market price of the stock is $30 per share, the dividend yield would be 5% ($1.50/$30).

These examples illustrate how dividend yield is calculated by dividing the annual dividend by the market price per share. It is an important metric for investors to consider when evaluating the potential return on their investment in a particular stock.