Dividend yield

Dividend yield turns a dividend into something comparable with a savings rate. A 2% yield means that at today's price, a year of dividends returns two cents per dollar invested, before anything the share price does.

It moves inversely with the price, which is the trap in it: a yield that has doubled has usually done so because the shares halved, and the reason they halved is often the reason the dividend is about to be cut.

$50m paid out across 25m shares, at a share price of $120.

1. 150 / 25 = $2.00 per share for the year.
2. 22.00 / 120 = 0.0167.

Every example in this glossary describes the same imaginary company, so the figures join up as you move between metrics.

• Check the payout ratio before trusting a high yield. The dividend has to be covered by something.
• A long record of rising dividends says more about a business than the level of the yield does.
• Compare against the risk-free rate. A yield below what a government bond pays is being held for growth, not income.

• It is backward-looking unless the company has declared the next payment, and a declared dividend can still be cut.
• Special one-off dividends inflate a trailing yield and will not repeat.
• It ignores buybacks entirely, so two companies returning identical amounts of cash can show very different yields.

Shown on the Dividends tab, computed from the company's own declared per-share history against the current price. It is not part of the scorecard: a dividend is a capital allocation choice rather than a measure of quality, and scoring it would penalise every company that returns cash by buying back stock instead.

The full methodology covers where the figures come from, how the statements are normalised, and what is deliberately left unadjusted.