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What is Dividend Yield and How is Dividend Yield Calculated

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Question: What is Dividend Yield and How is Dividend Yield Calculated
Answer: Dividend yield is an easy way to compare the relative attractiveness of various dividend-paying stocks. It tells an investor the yield he / she can expect by purchasing a stock. This allows a basis of comparison between other investments such as bonds, certificates of deposit, etc.

To calculate the dividend yield, divide the annual dividend by the current stock price.

An Example: If company XYZ was trading for $10 per share and paid a $1 dividend, how much will the stock yield each year for the investor? Using our formula (Annual Dividend ÷ Current Stock Price = Dividend Yield), we find the answer is 10%.

For more information, read The Complete Guide to Dividends and Dividend Investing.

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