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Dividend yield

Annual dividends per share divided by the share price, expressed as a percentage; it rises automatically when the price falls.

Yield is a ratio, so it moves for two reasons: the company changing the payment, or the price moving. A yield that jumped from 3% to 9% almost always means the price fell, and the market is signalling doubt about the payment rather than offering a gift.

Check the trailing versus forward basis. Trailing yield uses the last four declared payments; forward yield annualises the most recent one. After a dividend-cut the trailing figure is stale and misleading.

Example: $2.40 of annual dividends on a $60 stock is a 4.0% yield. The stock falls to $30 with the dividend unchanged and the yield reads 8.0%. If the payment is then halved to $1.20, the yield returns to 4.0% on the lower price.

Related: dividend, dividend-payout-ratio, income-stock, dividend-cut

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