Study Notes

Dividend Yield

Level:
AS, A-Level
Board:
AQA, Edexcel, OCR, IB

Last updated 22 Mar 2021

Another important and common measure of shareholder return is dividend yield.

Dividend yield is a better shareholder ratio to use than dividend per share if we are trying to assess the rate of return on investment.

Dividend yield can only really be effectively used when it is considered in context.

For example, how does the dividend yield of Company A compare with a similar competitor Company B?

How has dividend yield changed between one period and another?

Also, how does the dividend yield compare with the alternatives?

What we don't know if whether the shareholders consider it to be an acceptable return for the perceived risk investing in the shares of the business.

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