The dividend yield on a company stock is the company's annual dividend payments divided by its market cap, or the dividend per share divided by the price per share. It's often expressed as a percentage.
Example:
General Electric Co.
- Share price: $36.00
- Annual dividend: $0.88
- Dividend yield: 2.44% (0.88/36.00)
Historically, a higher dividend yield has been considered to be desirable among investors. A high dividend yield is considered to be evidence that a stock is underpriced, whereas a low dividend yield is considered evidence that the stock is overpriced.