How to use the Dividend Yield
- Enter the annual dividend per share, or the quarterly figure times four.
- Enter the current share price for yield, or your purchase price for yield on cost.
- Enter your share count to see the annual income.
- Check the payout ratio against earnings before treating the yield as reliable.
How the calculation works
Yield is annual dividend ÷ price × 100, so it moves inversely with price: a falling share price mechanically raises the yield. That is why an unusually high yield is often a warning rather than an opportunity — the market may be pricing in a cut the dividend history does not yet show. The payout ratio, dividend ÷ earnings per share, is the sanity check: ratios above roughly 80% leave little room for a bad year.
Yield on cost uses your original purchase price and rises over time as a company raises its dividend, which is why long-term holders of dividend growers report yields far above the current market figure. It measures your position's performance, not the stock's present attractiveness — a new buyer would receive the current yield, so yield on cost should never drive a buy decision.
Yield = annual dividend / price × 100 ; yield on cost = annual dividend / purchase price × 100 ; payout ratio = dividend / EPSSource: Standard dividend metrics; payout ratio sustainability thresholds per equity analysis convention.
Worked example
340 shares bought at 28.40, now trading at 41.60, paying 0.47 quarterly with EPS of 2.62.
- Annual dividend = 0.47 × 4 = 1.88.
- Current yield = 1.88 / 41.60 = 4.52%.
- Yield on cost = 1.88 / 28.40 = 6.62%.
- Payout ratio = 1.88 / 2.62 = 71.8%; annual income = 340 × 1.88 = 639.20.
4.52% current yield, 6.62% on cost, 639.20 of annual income — with a 72% payout ratio that is covered but not comfortably.
Frequently asked questions
Is a high dividend yield good?+
Not necessarily. Yield rises when the price falls, so an outlier often signals that the market expects a cut. Check the payout ratio and dividend history before treating it as income.
What payout ratio is sustainable?+
Below about 60% of earnings leaves room for reinvestment and bad years. Above 80% is fragile, though REITs and utilities operate at structurally higher ratios by design.
What is yield on cost useful for?+
Tracking how your own position has performed as dividends grew. It says nothing about whether to buy more today — a new purchase earns the current yield.
Are dividends guaranteed?+
No. They are declared at the board's discretion and can be cut or suspended at any time, which is exactly what tends to happen to the highest-yielding names in a downturn.
Last reviewed August 31, 2026. We review this page whenever the underlying formula, tax year, published rate or standard changes.