Dividend yield — definition and quick calculation. Dividend yield equals annual dividends per share divided by current share price, expressed as a percentage. It measures the income return you’d get at today’s price if the company continued paying the same dividends. Yield is a handy snapshot for income investors who prioritize cash flow, but it must be interpreted alongside other signals: a rising yield can result from higher dividends or a falling share price (which could signal stress). Conversely, a low yield could reflect fast growth (company reinvesting profits) rather than low attractiveness.

Interpreting yield and practical uses. Use yield to compare income across stocks or funds, but pair it with payout ratio, dividend history, and business fundamentals. A sustainable dividend typically has a reasonable payout ratio (earnings devoted to dividends) and stable cash flows. Reinvesting dividends accelerates compounding; many investors use dividend reinvestment plans (DRIPs) to automatically buy more shares. For dividend-focused allocations, balance yield with quality: prioritizing moderately high yields from stable companies often beats chasing the highest yields, which can be risk signals.