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Glossary
Income

Dividend yield

Annual dividend as a percentage of the share price.

Note the denominator. Yield rises automatically when the price falls, which means the highest yields on any screen usually belong to the companies in the most trouble.

A 12% yield is not generosity. It is the market telling you, loudly, that it does not believe the dividend will survive.

The formula
Dividend yield = Annual dividend per share ÷ Share price
Figure

The divergence that precedes most disasters

Y1Y2Y3Y4Y5Reported profitOperating cash

Reported profit climbing while the cash it supposedly generated goes nowhere. Either customers are not paying, or the sales were never really made.

Why it matters

It is the headline number in income investing, and the most effective trap in it.

The mistake everyone makes

Buying the highest yield you can find. That is a screen for distress, not for income.

Related terms

Payout ratio
The share of profit handed out as dividends.
Dividend cover
How many times over the company's earnings could pay the dividend.
Free cash flow
The cash actually left over after the business has paid to keep itself alive.

See Dividend yield on a real company

SteadyShares pulls this straight from the filings for 1,100+ companies, alongside moat scores, DCF fair value and peer comparison. Free to look around.

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