What is a dividend yield?

Learn what a dividend yield is and what it can tell investors about a company's plans to return profits to its investors.

Shrinking piles of coins © Getty Images/iStockphoto
(Image credit: © Getty Images/iStockphoto)

A dividend yield tells us what percentage of a company’s current share price is paid out in dividends each year.

A company usually pays a dividend as a way of returning excess profits to investors. It can also be described as a reward or thank you to shareholders for taking on the risk of investing in the stock in the first place.

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Rupert Hargreaves
Contributor and former deputy digital editor of MoneyWeek

Rupert is the former deputy digital editor of MoneyWeek. He's an active investor and has always been fascinated by the world of business and investing. His style has been heavily influenced by US investors Warren Buffett and Philip Carret. He is always looking for high-quality growth opportunities trading at a reasonable price, preferring cash generative businesses with strong balance sheets over blue-sky growth stocks.

Rupert has written for many UK and international publications including the Motley Fool, Gurufocus and ValueWalk, aimed at a range of readers; from the first timers to experienced high-net-worth individuals. Rupert has also founded and managed several businesses, including the New York-based hedge fund newsletter, Hidden Value Stocks. He has written over 20 ebooks and appeared as an expert commentator on the BBC World Service.