What is Dividend Yield and How is It Calculated

For dividend-paying companies, this is the percent paid back over to investors in the form of a dividend over last year, calculated by taking the dividends per share over the last 12 months divided by the current price per share.

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What is Dividend Yield

Dividend yield is the percent of the current share price of the company that was paid out in dividends over the last year, expressed as a percentage.

The dividend yield of a company is dynamic and always changing, the stock price changes whenever the market is open and most companies that pay dividends, pay them quarterly. The price of the stock is aways changing and the dividends per share changes.

When the price of the stock rises, the dividend yield decreases. and when the price of the stock falls, the dividend yield increases. When a company increases their dividend, the dividend yield increases and when the decrease their dividend, the dividend yield falls.

How is Dividend Yield Calculated

To calculate dividend yield, you take the dividends per share paid over the last 12 months and divide it by the current share price, dividend yield is normally presented as a percent.

Dividend Yield Formula

Dividend Yield =  Dividends per Share Paid Over Last 12 Months / Current Price Per Share

Dividend Yield Examples

Hypothetical Company Dividend Yield Example

Company A has paid a quarterly dividend of $0.25 per share for the last 4 quarters and the price per share is currently $50. The dividends over the last 12 months is $1.00, divide that by the share price of $50 and you get a dividend yield of 2.00%.

3M Dividend Yield Example

As you can see in the image below, 3M paid a dividend of $1.49 per share for the 4 quarters of 2022, for a total of $5.96 for the year. The stock price at market close on Friday, February 17, 2023 for 3M (MMM) was $112.99. The dividend yield for 3M would be calculated by taking $5.96 and dividing it by $112.99, giving you a dividend yield of 5.27%.

Source: 3M Investor Relations

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