DIVIDEND YIELD Meaning and
Definition
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Dividend yield refers to a financial metric that represents the annual dividends received from an investment, expressed as a percentage of the investment's current market price. It is a commonly used ratio by investors to evaluate the level of income generated by a particular investment, usually stocks or mutual funds.
To calculate the dividend yield of an investment, one must divide the total annual dividends per share by the investment's market price per share, and then multiply the result by 100 to express it as a percentage. The dividend yield formula is: Dividend Yield = (Dividends per Share / Market Price per Share) * 100.
A higher dividend yield indicates a higher level of income relative to the investment's price, making it an attractive option for income-seeking investors. Conversely, a lower dividend yield suggests a lower level of income compared to the investment's value, indicating a potentially less attractive investment for those seeking regular dividend payments.
It is important to note that the dividend yield is influenced by several factors, including the company's earnings, dividend policy, and market conditions. Moreover, a high dividend yield could be a result of a declining stock price, while a low yield may suggest a well-performing stock with price appreciation potential.
In summary, dividend yield is a key financial ratio that measures the annual income generated by an investment relative to its market price, providing investors with insights to assess potential income opportunities and make informed investment decisions.
Common Misspellings for DIVIDEND YIELD
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Etymology of DIVIDEND YIELD
The term "dividend yield" is derived from two words: "dividend" and "yield".
1. Dividend: It comes from the Latin word "dividendum", which is the neuter gerundive of the verb "dividere", meaning "to divide" or "to distribute". In financial terms, a dividend refers to the portion of a company's profits that is distributed to shareholders.
2. Yield: It originates from the Old English word "gieldan", which means "to pay" or "to reward". In finance, the term yield refers to the income generated from an investment, typically expressed as a percentage of the investment's cost or value.
Combining these two words, "dividend yield" refers to the measure of how much cash an investment in a particular stock or security returns in the form of dividends.
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