Calculate dividend yield for stocks. Compare annual dividend income to stock price and evaluate dividend-paying investments.
High yield
At 5% annual growth, your yield on cost would be 6.52% in 10 years.
Assumes 5% annual dividend growth
Dividend yield is the annual dividend payment divided by the stock price, expressed as a percentage. It tells you how much income you receive for each dollar invested in a dividend-paying stock.
A stock priced at $50 with a $2 annual dividend has a 4% yield. You'd receive $4 in dividends for every $100 invested.
When stock prices fall, dividend yields rise (assuming the dividend stays constant):
| Stock price | Annual dividend | Yield |
|---|---|---|
| $100 | $3 | 3.0% |
| $75 | $3 | 4.0% |
| $50 | $3 | 6.0% |
A rising yield can signal a buying opportunity — or a company in trouble. Context matters.
| Strategy | Focus | Typical yield |
|---|---|---|
| High yield | Current income | 4-8%+ |
| Dividend growth | Growing income | 1-3% |
| Balanced | Both | 2-4% |
Growth stocks often have lower yields but faster dividend increases.
| Investment | Typical yield |
|---|---|
| Money market | 4-5% (current) |
| Treasury bonds | 4-5% |
| Corporate bonds | 5-7% |
| S&P 500 average | 1.3-1.5% |
| Dividend ETFs | 2-4% |
| REITs | 3-6% |
| Utilities | 3-5% |
| High-yield stocks | 5-10%+ |
| Period | Average yield |
|---|---|
| 1920s-1960s | 4-6% |
| 1980s-1990s | 2-4% |
| 2000s-2010s | 1.5-2.5% |
| 2020s | 1.3-1.8% |
Yields have declined as companies shifted toward buybacks and reinvestment.
Yield on cost (YOC) measures your dividend yield based on your original purchase price, not current price:
Example: You bought at $25, now the stock pays $2/year:
This is why dividend growth investors focus on buying quality stocks early.
Starting with $1,000 annual dividend at 7% growth:
| Year | Annual dividend | Cumulative received |
|---|---|---|
| 0 | $1,000 | $1,000 |
| 5 | $1,403 | $6,153 |
| 10 | $1,967 | $13,816 |
| 20 | $3,870 | $43,865 |
| 30 | $7,612 | $101,073 |
Reinvesting dividends to buy more shares accelerates compounding:
$10,000 invested at 3% yield with 5% dividend growth:
| Year | Without DRIP | With DRIP |
|---|---|---|
| 10 | $488/year | $674/year |
| 20 | $796/year | $1,511/year |
| 30 | $1,297/year | $3,399/year |
DRIP more than doubles income over 30 years.
Very high yields (8%+) often signal problems:
| Payout ratio | Interpretation |
|---|---|
| < 30% | Very conservative, room to grow |
| 30-50% | Healthy, sustainable |
| 50-70% | Moderate, watch earnings |
| 70-90% | High, less margin of safety |
| > 100% | Unsustainable without earnings growth |
Higher is safer. Below 1.0 means the company is paying out more than it earns.
Dividend Aristocrats are S&P 500 companies that have increased dividends for 25+ consecutive years. They demonstrate:
Examples include Coca-Cola, Johnson & Johnson, and Procter & Gamble.
Dividend taxation depends on:
To generate $1,000/month ($12,000/year) in dividends:
| Yield | Required investment |
|---|---|
| 2% | $600,000 |
| 3% | $400,000 |
| 4% | $300,000 |
| 5% | $240,000 |
| 6% | $200,000 |
Traditional retirement planning uses a 4% withdrawal rate. A portfolio yielding 4% in dividends could theoretically fund retirement without selling shares.