Dividend yield

What is dividend yield

Dividend yield is a financial metric that expresses the ratio of the annual dividend paid per share to the current market price of the share. It is quoted as a percentage and helps investors compare the attractiveness of different stocks from the perspective of a company's dividend policy.

Formula: Dividend yield = (Annual dividend per share / Current share price) × 100

For example, if a share costs CZK 1,000 and the annual dividend is CZK 50, the dividend yield is 5%.

Why dividend yield matters

• It shows the return on investment from dividends regardless of share price movements.
• It helps compare stocks with each other and with other investments, such as bonds.
• It is a guide for investors focused on income investing.

What influences the dividend yield

• The size of the dividend – a higher dividend increases the yield.
• The market price of the stock – if the price falls and the dividend stays the same, the dividend yield rises (and vice versa).
• Company policy – companies can raise, cut or skip dividends depending on profits and strategy.

Dividend yield vs. dividend growth

A high dividend yield alone does not necessarily mean a good investment. Equally important is the growth of the dividend over time, the company's financial stability and its ability to sustain the payout. This aspect is often evaluated using the payout ratio.

Downsides of a very high dividend yield

• It can signal that the stock price has fallen because of problems at the company.
• Excessively high dividends may be unsustainable if the company does not generate enough free cash flow.

Dividend yield on the Stonkee platform

On Stonkee you can track the dividend yield for individual stocks and ETFs including its historical development. The AI also evaluates whether the current dividend yield is sustainable and recommends suitable investments for dividend strategies.

Summary

Dividend yield is a key metric for investors seeking passive income from investments. When assessing it, however, it is important to also take into account the stability and growth of the dividend, the company's financial health and its long-term prospects.