Dividend yield

Dividend yield expresses what the company currently pays in cash per year as a percentage of the current stock price. A $40 stock paying $1.60 in annual dividends yields 4%. The figure is a ratio of two moving numbers — the payment changes when the company raises or cuts its dividend, and the yield rises when the price falls even if the payment is unchanged.

Yield is most interpretable alongside payout ratio and dividend history. A high yield can mean either (a) a stable payer whose price has pulled back, creating a buying opportunity, or (b) a distressed payer whose dividend is about to be cut — the "yield trap" pattern, where the trailing yield looks high because the market has already priced in the cut.

Forward yield uses the announced or expected next-twelve-months payment; trailing yield uses the last twelve months of actual payments. For a stable payer the two are close; for one that recently changed its dividend they diverge.