Dividend yield gives an indication of the rate of
return from dividends that an investment in a company
will return. It is calculated by
dividing the dividend per share by the market price
of the share. For example, suppose that good old company
XYZ pays out a dividend of 8 cents per share, and the
shares are selling for 210 cents each:
Div Yield = Dividend per share / Price per share
= 8 / 210
= 0.038
= 3.8%
Dividend yield cannot
really be compared with the return from other
investments
such as
term deposits, because a company will also give
a
capital return when the
share price changes.