Define: Dividend Yield

UK Accounting Glossary

Definition: Dividend Yield


Quick Summary of Dividend Yield


Dividend per share divided by current market price.



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Full Definition of Dividend Yield


The dividend yield is computed by dividing the annual dividend by the stock price. Older, slow-growth companies usually have a relatively high dividend yield, because they have fewer investment opportunities and thus tend to return more earnings to shareholders. Newer, high-growth companies usually have a low or no dividend yield, because most or all of their earnings are reinvested in their business. For a slow-growth firm with fewer prospects of substantial price appreciation, the higher dividend yield serves to make the stock more attractive and support the stock price.

Dividend yield plays a key role in the Dogs of the Dow investment strategy, in which investors rotate into those blue-chips with the highest dividend yield. But beware: a high dividend yield is no sure measure of a safe, high-return investment. A stock may have a high dividend yield only because its price has fallen sharply on expectations that the company faces hard times and will cut its dividend.


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Definition Sources


Definitions for Dividend Yield are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • BusinessDictionary.com
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 23rd December 2018.