Nov 24, 2021 | Knowledge Dividend Yield simply explained

Table of contents

1. What is the dividend yield?
2. How is the dividend yield calculated?
3. What does the dividend yield mean?
4. Top 10 stocks with the highest dividend yield worldwide

What is the dividend yield?

The current dividend yield expresses the ratio of the dividend paid out to the share price as a percentage (Dividend explained simply). As the share price fluctuates daily, the dividend yield also changes daily.

With a share price of EUR 100, a dividend yield of 3 percent means that a dividend of EUR 3 per share has been distributed.

According to the dividend strategy, a distinction is made between the current dividend yield and the average dividend yield over the last 10 years. In the following article, I will discuss the current dividend yield.

How is the dividend yield calculated?

The dividend per share is divided by the current share price.

Calculating the current dividend yield:

The calculation of the current dividend yield of Walmart shares as of September 13, 2024 is shown as an illustration:

According to the dividend strategy, the following points are awarded for the key figure “current dividend yield”:

The Walmart share thus receives 0 points, as the dividend yield of 0.95 percent is less than 2 percent.

What does the dividend yield say?

From the current dividend yield, you can deduce what return you are likely to achieve with a share, regardless of possible price gains (purely on the basis of the dividend).

But be careful:

1. The dividend yield refers to the last dividend paid out. A company is not obliged to pay a dividend (a dividend is not an obligatory interest). You may therefore not receive this yield, as the dividend may be canceled or reduced.
2. A high dividend yield does not always indicate an attractive investment. A high dividend yield is often linked to a sharp fall in the share price. This, in turn, is often the result of poor future prospects for the company.

Therefore, in addition to the dividend yield, you should always consider the dividend score and its dividend ratios, the future viability of the business model and future cash flows when making a dividend investment.

Top 10 stocks with the highest dividend yield worldwide

The following table shows mid and large cap stocks with the highest current dividend yield worldwide and a dividend continuity of at least 3 years.