This the ratio of the dividend calculated per share to that of the share price of each share. The dividend ratio indicates the percentage of amount an investor or a shareholder is earning per share of a company. The formula of dividend yield ratio can be depicted as under:-
Dividend Yield Ratio = Dividend per Share/ Share Price of Each Share
This ratio is of more interest for investors as it calculates how much an investor is getting from the company in the form of shares. If there is no capital returns for a particular financial year in a company that dividend yield ratio can be calculated as the return on investment on the stocks of company. Dividend yield ratio can vary from company to company depending upon the market value of the share and the profit yield by the company. However large and older companies tend to pay more to their shareholders as compare to small and younger companies.
For example if the annual yield per share annually of a company is 2 dollars per share and the share price in the market is 25 dollars per share. The divided yield can be calculated as follows:-
Dividend Yield = 2/25 = 0.08
For investors and shareholders the dividend yield is the measure of amount earned against every dollar invested in the company. This ratio is usually used in trend analysis in which an investor compares the past ratios with the present one and decides whether to invest in this company. Investors that require a consistent return are more interested in this ratio.
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