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Dividend Yield Calculator

One of the chief reasons for people buying shares is to earn a steady income in the form of dividends. Well-established companies pay dividends on a regular basis to their shareholders. Whenever firms make a profit, a part of it is distributed to the shareholders, who are part-owners of the company. Investors in dividend-paying stocks look for those with a high dividend yield. You can use a dividend yield calculator to find out if a stock is suitable for your needs or not.

It's important that the company pays out dividends on stocks for your long-term investment plan. It helps your investment to grow. There is a high demand for company stocks that pay a regular dividend. You must have also noticed that stock prices make maximum movement around the time of dividend announcement. So, having a clear understanding of dividends will help you pick the right stocks.
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Let's understand the dividend yield with the help of an example.

The dividend payment is variable. Companies announce dividends based on yearly performance. For ease of calculation, let's assume the company announces Rs 5 dividend for each share. Now, if the share price for the firm is Rs 100, then the dividend yield value equals annualise dividend paid divided by the price per share. In this example dividend yield is equal to 5 per cent.

The process to calculate the dividend yield is comptlicated and time-intensive. This is why a dividend yield calculator is an absolute lifesaver. It is an automated computation tool that uses user input to calculate dividend payout – annual dividend per share, quarterly dividend, or total dividend, quickly and accurately.

Dividends create a passive stream of income for investors. Company stocks that have a good track record of paying high and stable dividend yields see consistently high demand for their shares among investors.

Angel One dividend yield calculator is a simple tool that anyone can use, and to use it, you wouldn't have to learn the complicated dividend yield formula. It also lets you compare high yield stocks to find the ones that suit your profile.

How do you calculate dividend yield?

One can calculate dividend yield using a simple formula of dividing the total annual dividend paid per share by the price of individual equity.

Let's understand with an example. A company pays out Rs 5 dividend, and the price per share is Rs 150. Then dividend yield is 3.33 per cent, calculated by dividing the dividend per share by its price.

Since it is challenging to calculate dividend yield manually, investors use an online dividend yield calculator that gives quick and accurate results.

How do you calculate dividend payout?

Investors commonly calculate the dividend payout ratio to estimate how much a company pays to its investors as dividends and how much it retains for reinvesting and debt repayment. Simply saying, the dividend payout ratio (DPR) is the dividend paid against net income.

Investors use the following formula to calculate DPR.

DP = dividend paid
NI = net income

What is a good dividend yield for a stock?

Dividend yield allows investors to measure the profit of each rupee they invest in and the potential risk of the particular investment. Though 'good' dividend yield value would depend on the industry, market condition, and price of shares, most investors consider a 2 to 6 percent dividend on stocks a good return.

What is the dividend yield?

You may have heard of earning per share (EPS). It is the earnings (profit) of a company divided by the number of shares outstanding. The dividend yield is akin to EPS and equals annual dividends paid out by the company divided by its market cap. It is also called the dividend-price ratio, or dividend per share divided by price per share. A dividend yield calculator online can help you find out which share is the best when it comes to dividends.

Here’s an example of dividend yield. Let’s say you have invested in a scrip that pays out dividends of Rs 10, while its share price is Rs 100. In this case, the dividend yield would be 10/100, or 10 per cent.

So to find out the yield, just enter the stock price, the frequency of the dividend (monthly, quarterly, yearly) and the dividend amount per share into the dividend yield calculator.

Making sense of dividend yield calculator results

When you use your dividend yield calculator, you might feel elated on discovering that your favourite stock has a very high dividend yield. But do not get carried away. You don’t want to invest in a company that distributes a very large chunk of its profits instead of investing in future growth.

Another thing to remember while using the dividend yield calculator is, that some of the more well-run firms may focus on increasing share prices instead of dividends. So if you just focus on dividends, you could lose out on price appreciation.

Finding out dividend yield is certainly important. But, while using your dividend yield ratio calculator, you must not lose sight of various other considerations that affect a company’s fortunes – like the quality of its management, whether it is growth-oriented or not, if it is in an industry with potential for growth and so on.

Certainly looking at dividend yield has its limitations. But it can be helpful. Remember that through the power of compounding, dividends -- over the years -- can result in huge capital appreciation.       

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