Sharechat Logo

What is a 'dividend yield'?

Wednesday 23rd January 2002 1 Comment

Text too small?
Q: How does a company decide what kind of dividend to pay, and what are dividend yields?

A: Most companies pay dividends - usually once every six months - based on profitability. Companies may also have what they call a 'dividend policy', which means they promise to pay a certain percentage of profits out as dividends. However companies are not obliged to pay dividends and, depending on other uses for their profits, may not pay a dividend at all. Instead they may use the funds for expansion, buying other companies or paying off debt.

A company's dividend yield is just one of the tools investors use to compare different stocks. Yields are always based on historic information, and are often quoted in share tables in newspapers. To work out the dividend yield simply divide last year's dividends by the price you buy the shares and multiply by 100.

For example, if Telecom shares are at $7.50 and last year it paid out $0.44 in total dividends (four quarterly dividends of 11 cents), then the dividend yield will be: $0.44 divided by $7.50 multiplied by 100 = 5.86% tax paid. Dividends are normally received with imputation credits attached as the company has already paid the tax on its profit.

  General Finance Advertising    

Comments from our readers

On 8 March 2014 at 10:02 pm Dividendinvestor said:
You are right that usually companies pay dividends to their shareholders once in a year. Amount of dividends depends upon benefit of company. I usually prefer to access nz.dividendinvestor.com as it provides me full details about dividends and latest dividend announcement.
Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

What is treasury stock?
Can you explain the term "split factor adjustment"?
What are imputation credits?
When is a company listed as CD (cum-dividend)?
Can I buy shares in my daughters' names?
What is an IPO?
What do bid/offer and buy/sell mean?
What does 'Div cps' stand for?
When do shares go ex-dividend?
Do I have to sell my shares through the broker I bought them from?

IRG See IRG research reports