How to Find Expected Dividend Yield

Accounting is a vast subject with intense data calculations and different techniques involved to evaluate the firm. Hence, it should never be neglected at any stage especially when dealing with the investment in stocks and bonds of a firm. Stock evaluation is the one of the most difficult task because the information is changing every second in the stock market and the figures of the firm are based on historic data which can be mapped to the future but the element of risk is always there. However, if there is no risk there is no return and similarly, higher the risk higher is the return in the stock market. Dividend is the amount that stock holders receive usually at the end of a fiscal year.

However, it is not mandatory on the firm to payout the dividend to the stock holders because it can either withhold the earnings for reinvestment in the firm to finance future projects or if there is a loss, there is no point of giving a dividend because it is a factor which is shared when there is some profit earned by the firm. So, for an investor it is crucial that he calculates the dividend yield of the stock which is obviously based on a simple formula but getting the figures is the main task. For those investors who have bought the stock of a firm are eligible for the dividend announced at the Annual General Meeting of the firm. So, they can always pre-calculate their dividend amount and also the profit their investment has yielded after a particular period.

Instructions

  • 1

    You need the following figures for the calculation of the dividend yield:

    Total dividend that is to be allocated amongst the shareholders

    Number of shares issued by the firm

    Stock price of the share that is prevailing in the stock market

  • 2

    The first two figures can be found in the annual report of the firm. The last figure will be available on the stock exchange website where the particular stock is listed.

  • 3

    The formula for the calculation of Dividend Yield is: (it is always shown in percentage form)

    Dividend Yield = annual dividend per share / stock's price per share

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