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Current Yield Formula:
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The current yield is a financial ratio that shows the annual income (dividends or interest) an investment provides relative to its current market price. It's expressed as a percentage and helps investors compare the income-generating potential of different investments.
The calculator uses the current yield formula:
Where:
Explanation: The formula calculates what percentage of the stock's price is returned to investors as dividends each year.
Details: Current yield is important for income-focused investors who prioritize regular dividend payments over capital appreciation. It helps compare dividend stocks and assess whether a stock is overvalued or undervalued based on its dividend payout.
Tips: Enter the annual dividend per share in dollars, the current stock price in dollars. Both values must be positive numbers.
Q1: What's a good current yield?
A: This depends on market conditions and investment goals. Typically 2-6% is common for stable companies, but higher yields may indicate risk.
Q2: How is current yield different from dividend yield?
A: They're often used interchangeably, but technically dividend yield uses the annual dividend while current yield can apply to any investment with periodic payments.
Q3: Does current yield consider dividend growth?
A: No, it only considers the current dividend. For growing dividends, consider the dividend growth rate and yield on cost.
Q4: Why might a high current yield be a warning sign?
A: An unusually high yield might indicate a dividend that's unsustainable or a stock price that's fallen due to company problems.
Q5: Should I only consider current yield when investing?
A: No, it's just one metric. Also consider the company's financial health, dividend history, growth prospects, and your overall investment strategy.