Introduction To Dividend Yields
the dividend yield is a financial ratio that indicates how much a company pays in dividends each year relative to it's share price. for investors, dividend yield is a way to measure how much cash flow they're getting for each dollar invested in a dividend-paying stock. andy is investing in casey's corn. the stock trades at $20 per share and pays an annual dividend of $1 per share. arthur is investing in joe's motors. it also has an annual dividend of $1 per share, but it trades at $40 . who has the higher dividend yield? andy. casey's corn has a dividend yield of 5%, compared to the 2.5% for joe's motors. while arthur and andy both get the same amount in dividends per year, arthur is getting less return for the money he invested, because he pays twice as much for his shares. however, dividends aren't the only way in which a stock can generate returns for investors. gain in the stock's price can also create profit for investors. this is why stocks with less growth potential are more likely to offer higher dividend yields to their investors than stocks with high growth potential and therefore high chance to create returns through price appreciation. also, dividends aren't guaranteed. a company can decide to reduce or eliminate its dividend in times of financial hardship. therefore, the dividend yield is only one of many factors that should be considered when choosing a stock.
- dividend yield・・・配当利回り
- financial hardship・・・財政的苦境