How to Calculate Dividend Yield (with Examples)
Updated
Dividend yield answers one question: how much income does each dollar invested produce per year? The formula is simple; the judgment is in which numbers you put into it.
The formula
Dividend yield = annual dividends per share ÷ share price × 100
A stock paying $1.00 per share per year at a $25.00 price yields 4.00%. A $10,000 position at 4% produces about $400 a year (≈ $33 a month) before taxes.
Trailing vs. forward yield
- Trailing (TTM) yieldsums the actual payments from the last twelve months. It's factual — money that was really paid — which is why every calculator on this site uses it.
- Forward yieldannualizes the most recently declared payment (latest quarterly dividend × 4). It reflects the current rate sooner after a raise or cut, but it's a projection of payments that haven't happened.
The two diverge most after dividend changes and for funds with variable payouts — for option-income ETFs, where every payment differs, forward yield can be wildly misleading (see covered-call ETFs explained).
Yield on cost
Yield on cost divides this year's dividends by what you originally paid, not today's price. Buy at $25 with a $1.00 dividend (4% yield); if the dividend grows to $2.00 over the years, your yield on cost is 8% even if the market yield still shows 4%. It's the number that makes dividend growth visible — our calculators track it year by year in the breakdown table.
The yield trap
Yield has a denominator, and that's how it lies. A stock at $50 paying $2.00 yields 4%. If the business deteriorates and the price halves to $25, the screen now shows 8% — the yield doubled because the company got worse, not better.Unusually high yields versus a stock's own history or its peers are a prompt to investigate (is the dividend about to be cut?), not a bonus. Checking the payout ratio — dividends as a share of earnings or cash flow — is the standard sanity check: payouts above what the business earns are on borrowed time.
Yield ≠ return
Total return is yield plusprice change. A 7% yield on a stock declining 5% a year is outperformed by a 2% yield growing 8% a year. That's why our calculators model dividend yield, dividend growth, and price growth as three separate inputs — try moving each one on the universal calculator and watch which matters most over 20 years.
Worked example with real data
Every ticker page on this site shows the calculation live: trailing-twelve-month payments summed, divided by the verified share price, with the payment history and sources listed so you can re-derive the number yourself.