What it means
Dividend yield expresses the cash income from holding a stock as a percentage of the share price. Calculated as annual DPS / price. A higher yield means more cash return per dollar invested - but can also signal distress.
Why it matters
Dividend yield is comparable across companies and to bond yields. It also forces management discipline - companies cutting dividends typically take a multi-quarter hit to share price.
How to use it
Watch yields above 6-7% with skepticism - they often signal a price decline anticipating a cut. Consistent dividend growth (Dividend Aristocrats) is usually a higher-quality signal than yield level.
Take it further
Want a worked example or a deeper dive? Ask Rocky how this concept applies to your specific watchlist or trade idea.
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