How is dividend yield calculated for a stock?

• A. Annual dividend per share divided by current price per share, expressed as a percentage.
• B. Current price per share divided by annual dividend per share.
• C. Total dividends paid over the last year divided by the number of shares outstanding.
• D. Dividend yield equals the stock’s price divided by its dividend line.

Answer: (A)

Dividend yield tells you how much income a stock provides from dividends relative to its price. It is calculated by taking the annual dividend per share and dividing it by the current price per share, then expressing that fraction as a percentage. To get the annual dividend per share, add up all dividends paid per share over the past year (for quarterly payers, sum the four quarterly dividends). This formula shows the return you would expect from dividends if you bought the stock today.

For example, if a stock pays $1.60 per share in a year and its current price is $32, the dividend yield is 1.60 divided by 32, which equals 0.05, or 5%.

Why this approach fits: it directly relates the income you receive per share to the amount you pay per share, giving a simple, comparable measure of how generously a stock pays you in dividends.

Why the other ideas don’t fit as well: inverting the ratio would misstate the relationship between income and price, using total company dividends instead of per-share dividends ignores the amount you actually own, and terms like a “dividend line” aren’t standard for calculating yield.