How to calculate the dividend return of a stock investment?

The dividend yield shows how much a company pays out in dividends each year relative to its stock price. The dividend yield is an estimate of the dividend-only return of a stock investment.

For example, if a company's dividend yield is 7% and you own $10,000 of its stock, you would see an annual payout of $700 or quarterly installments of $175.

Assuming the dividend is not raised or lowered, the yield will rise when the price of the stock falls. And conversely, it will fall when the price of the stock rises.

Why is Dividend Yield important?

1. The primary reason to understand dividend yield is to help you understand which stocks offer you the highest return on your dividend investing dollar.

2. Didend yields make it easy to compare stocks

3. Increasing dividend yields indicates financial health

An unexpectedly high yield could actually be a red flag. This might happen for a couple of reasons:
1. The company's sock price has recently plummeted.The company's stock price has recently plummeted
2. The company is attempting to woo investors with a high dividend payment. But this dividend payout—and increased stock value—may not last if the company isn't financially stable and can't afford to maintain the higher dividend payments.

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