Financial Terms Glossary

Dividend Yield

Formal

The dividend paid out to shareholders expressed as a percentage of share price. It indicates the percentage investment return on the share value in any particular year.

Informal

You loan $10 to a friend and you are paid $1 every year in interest. This is a 10% 'yield'. You will however get your $10 back one day and its value is static. You have a share that is worth $10 and the company declares a $1 dividend. This is a 10% 'dividend yield'. The following year the share price has risen to $20 and the company again declares a $1 dividend. This is a 5% 'dividend yield' based upon a higher share price even though the amount of the dividend remains unchanged.

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