The dividend yield is the amount of dividends you will earn annually as a percentage of the value of your investment. For example, if a stock is $20, and it pays a $0.25 per quarter, which is $1.00 per year, then the dividend yield is 5% APY. The following is a simple way to calculate the dividend yield of a stock.
Step 1: Find the current share price of the stock. You can do this on yahoo finance or google finance.
Step 2: Find the dollar amount in dividends the stock pays out per year. Most stocks pay dividends quarterly, so you will have to multiply the quarterly dividend by four to get the annual dividend. You can find this information on yahoo finance, google finance, or the company website under investor relations.
Step 3: Take the dollar amount in dividends the stock pays out per year (that you found from Step 2), and divide it by the current share price (in Step 1). The result is the current dividend yield of the stock. Calculating the dividend yield of a stock is summarized below.
Annual Dividend Payout in Dollars / Current Price of the Stock
When calculating the dividend yield, it is only necessary to use one share of stock for calculations, since the dividend yield remains the same no matter how much stock you own. The dividend yield of the stock will change over time as the share price fluctuates, and if the company decides to raise or cut its dividend. Beware of dividends that pay out a yield of over 10% APY, because there is a risk that the company may not be able to afford to pay out the dividend.