The term dividend yield, when heard by the waiting ears of any investor, is enough to wake them from their dark and deep slumber. This is because dividend yield means the payout for investment. For instance, if you invested heavily in a company, at a certain point in time, it will release the dividends to their investors. You being one of them will receive your dividend yield and will be the measure of the success of your investment. Here are some tips on how to derive the dividend yield you should be receiving in return of your investment.
- The stock price. The first step in calculating the dividend yield of your investment is by checking the actual stock you have interest in. You can do this any number of ways however; the most efficient way is to monitor the stock online. Websites and portals like Yahoo and Google offer various stock monitoring options that provides you free, unhindered, and real time stock news. Depending on the online interface you go with, search for the three-letter stock representation for the company you invested in. As soon as you find it, search for the last traded price of the stock. This is the current price of the stock. Let's assume that the price of the particular stock is $20 per share.
- The dividend per share. On the same online interface, you can actually see how much the dividend is on a per share or per stock basis. For instance, if you are using Yahoo, then you will notice that there is a tab labeled as "Div and Yield". Click on this tab to find the right dividend of the company in question. So, if the figure on there is $1.00 then the dividend per share is $1.00 for those that have shares in that company.
- The dividend yield. To compute for the dividend yield of your investment, divide the dividend per share by the current share price. With the examples above, you will be dividing $1.00 by $20.00. The result will be 0.05. Convert it to percentage and you will get 5 percent. This means the dividend yield is at 5 percent.
- The baseline. It is critical to bear in mind that dividend yields of an investment that are 5 percent or more is normally considered as a high yielding investment.
- The factors. The dividend yield is greatly affected by many factors. The primary factor is the performance of the company in terms of revenue and profits against operating expenses. Other factors would be the economy and market situation, the entrance of new technologies that compete with the company's existing product, and the introduction of new people into the company's executive management staff or board. All these can affect the share price which will greatly affect the dividend yield.
Now that you are aware of what the dividend yield is and how to derive what you can get out of your investment, you can now ponder on what stocks will provide you the best return out of your investment. All these are crucial in securing your financial future.