wk 7

DIVIDEND YIELD = DIVIDEND FOR PERIOD

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INITIAL PRICE FOR PERIOD

The dividend yield formula can be used by investors who are looking for increasing or declining trends of the dividend yield. On a broader level, a company that is paying less in dividends relative to its price may be having problems or it could be retaining more of a percentage of its net income for growth. When evaluating a stock, it is important to consider the overall company and how much net income it is retaining as reinvesting its net income could lead to growth and an appreciation of the stock price..

An example of the dividend yield formula would be a stock that has paid total annual dividends per share of $1.12. The original stock price for the year was $28. If an individual investor wants to calculate their return on the stock based on dividends earned, he or she would divide $1.12 by $28. Using the formula for this example, the dividend yield would be 4%.

CALCULATING STOCK RETURN

P1-P0) + D

= ----------------

P0