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Dividend Yield Ratio

Understanding Dividend Yield Ratio: Evaluating Income from Dividends

The Dividend Yield Ratio is a financial metric that indicates the percentage return an investor receives in the form of dividends relative to the market price of a company's stock. It helps investors assess the income-generating potential of owning a particular stock through dividends.

Dividend Yield Ratio = (Annual Dividend per Share / Market Price per Share) × 100


Suppose Company ABC has the following financial details:


  • Annual Dividend per Share: $2.50

  • Market Price per Share: $50


To calculate the Dividend Yield Ratio:


  1. Divide annual dividend per share by market price per share and multiply by 100: (2.50/50)×100=5% 

A Dividend Yield Ratio of 5% indicates that an investor earns a 5% return on their investment in Company ABC through dividends, relative to the current market price of the stock.

Market Value Ratio

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