Dividend Yield

A figure that compares the dividend(usually excluding one-time special dividends) paid by a company with the current stock price of the company.

It is important to remember that dividends are paid out of a company’s earnings, so a company paying out a high dividend yield needs a sustainable business model for the high dividend yield to be consistent. A company in financial troubles may have a high dividend yield due to a sharp fall in its stock price. In these situations, the dividend may be cut or even eliminated. Therefore an investor should not chase yield blindly without enough research.