Dividend yield

A dividend is the cash a company or fund pays to its holders, usually each quarter, stated per share. The yield puts that payment against the price: four quarterly payments of $0.55 are $2.20 a year, and at $80 a share that is 2.75%. The figure quoted for a stock is most often the trailing yield, the last four payments over today's price; a forward yield takes the most recent payment, annualized, instead.

The yield has two moving parts and the price is the faster one. A dividend is declared a few times a year; the price changes every trading day. So the yield of a stock whose payment is unchanged rises on the days its price falls and falls on the days its price rises.

A fund's yield is its distributions over its share price, and the distributions pass through the dividends and interest of what the fund holds, after the fund's expenses are taken out. A stock that pays no dividend has a yield of zero, whatever its price has done.

A stock pays $0.55 a share each quarter, which is $2.20 a year. At $80 a share, the dividend yield is $2.20 divided by $80, or 2.75%. A position of 125 shares, worth $10,000, is paid $275 a year at that rate.

The price falls to $70 and the dividend is unchanged. The same $2.20 is now 3.14% of the price. The 125 shares still receive $275 a year; the position is worth $8,750, and the yield is higher because the price is lower.

Annual dividend, $0.55 × 4

$2.20

Share price

$80.00

Dividend yield, $2.20 ÷ $80

2.75%

Same dividend at $70, $2.20 ÷ $70

3.14%

The yield is the cash half of a holding's return. A share's rate of return over a year is the price change plus the dividends received, so a stock that paid 2.75% and fell 10% returned about −7.25%, and one that paid nothing and rose 10% returned 10%. The yield on its own says nothing about the price change.

Because the yield is a ratio, comparing two of them compares two prices as much as two payments. A yield that is high because the price fell is the same dollars per share it was before the fall.

In a taxable account, a dividend is counted by the IRS as income in the year it is paid, whether it is taken as cash or reinvested in more shares. Reinvested dividends buy new lots, each with its own cost basis and holding period.

Taiga Finance does not show a dividend yield, and a holding carries no dividend figure. Its drawer in Investments shows the market value, “{N} shares · ${X} / share”, the “Cost basis” and a “Lots” table whose “Gain $” column is the unrealized price gain per lot; a dividend paid on the holding is not in it.

The nearest thing it shows is the dividend as a transaction. On a brokerage or retirement account, the account's own activity, buys, sells, sweeps and fund income, is categorized “Transfers › Investment Activity”, which counts as neither spending nor income in Plan, cash flow and reports. The built-in categories also include “Income › Dividends”, and a transaction given that pair by hand counts as income.