Dividend Yield Explained

Dividend yield tells you the cash return a stock pays out each year, as a percentage of what it costs.

Dividend yield = yearly dividends ÷ market value

A 3% yield means that for every $100 invested, the company pays about $3 a year in dividends.

How to read it

• 1–3% is typical for healthy, growing companies.
• 4–6% can be attractive income — but check it’s affordable.
• Very high (7%+) is often a warning: either the price has crashed (pushing the yield up) or the dividend may be cut.

Yield alone doesn’t tell you if a dividend is safe. For that, look at the payout ratio (dividends ÷ profit) and how much is covered by free cash flow. A company paying out more than it earns is on borrowed time. Stocktoria rates each dividend safe / moderate / stretched / at-risk from exactly these.

See the safe-dividend list or read about free cash flow , which ultimately funds the dividend.