How to use the dividend yield calculator
The Dividend yield tool gives the yield on a share at today’s price:
- Dividend per payment. The amount per share of the latest regular dividend. Leave out special one-off dividends, which would overstate the yearly rate.
- Payments per year. Most US companies pay quarterly; many REITs and funds pay monthly; companies outside the US often pay twice a year or once.
- Share price. The current price, or a price you are considering.
- Shares you own, if you want your yearly income in dollars.
The Yield on cost tool compares the dividend you receive now with your original purchase price. Enter your average cost per share, the current annual dividend and today’s price. Adding the dividend at the time you bought shows how far the payout has grown.
The formulas
Dividend yield = Annual dividend ÷ Share price
Yield on cost = Current annual dividend ÷ Original price paidAll amounts are per share. Yields are shown as percentages: 0.0365 is 3.65%.
A worked example
A company pays $0.62 a share every quarter, so the annual dividend is $2.48. With the shares at $68, the dividend yield is 3.65%: every $10,000 invested at this price earns $364.71 a year.
You bought the same shares years ago at $40, when the dividend was $1.60 a year, a starting yield of 4.00%. The dividend has since grown 55.0%, so your yield on cost is 6.20%.
A monthly payer works the same way: $0.25 a month on a $50 share is $3.00 a year, a yield of 6.00%.
Forward and trailing yield
Financial sites quote two versions of the yield, and they can differ.
- Forward yield takes the latest regular payment and multiplies it by the number of payments a year. It reflects the current rate, including a raise announced last month. This is what the calculator shows.
- Trailing yield adds up the dividends paid over the past twelve months. It uses only money already paid, but lags behind any change.
For a company that raises its dividend once a year, forward yield runs slightly ahead of trailing. When the two differ sharply, look for a recent cut, a special dividend counted in the trailing figure, or a change in payment schedule.
Yield traps: when a high yield is a warning
Because yield is the dividend divided by the price, a falling share price raises the yield on its own. If the price drops 20% and the dividend stays at $2.48, the yield in the example climbs from 3.65% to 4.56%. Nothing about the business has improved; the market has simply marked the shares down.
That is the pattern behind most yield traps. The price falls because investors expect trouble: weaker earnings, rising debt or a payout the company cannot afford. The yield looks attractive just before the dividend is cut, and then both the income and the share price are lower. A yield well above the company’s own history or its sector is a reason to check the payout ratio, free cash flow and debt before buying. Our payout ratio calculator shows how much of earnings the dividend uses.
Yield on cost versus current yield
Yield on cost rewards patience: a dividend that has grown for years can make your yield on cost much higher than the current yield. In the example it is 6.20% against 3.65%.
It is a useful measure of how dividend growth has paid off, but a poor guide to decisions. The money in the holding is worth today’s price, not what you paid, so the yield on that money is the current yield of 3.65%. When comparing a holding with an alternative, use the current yield for both.
What this calculator does not include
- Taxes and withholding. Dividends are taxed, and foreign shares may have tax withheld at source. Our dividend tax calculator estimates the US tax.
- Future changes. The yield assumes the current dividend continues. Companies can raise, cut or suspend dividends.
- Price return. Yield measures income only. Total return also includes the change in the share price.