Dividend Yield Explanation

Different investors should use different fundamental analysis for the different stocks they target. For instance, it will be hard for an investor, who wants to invest in high growth technology stocks to find information on them into the various stock screens. This is true especially when the criteria selected are dividend paying indicators.

On the other hand, dividend investors, searching for a stock that will return them stable current income, should use Dividend Yield in their comparison of the different stocks available on the market, which fall under the investor's consideration.

Dividend yield represents the percentage return by the company that goes to the shareholders in the form of dividends.

Dividend Yield = Annual Dividend per Share / Stock's Price per Share

Companies that are relatively young tend to pay less in dividends to their shareholders since their focus is on growth and thus they need funds to finance the growth. On the other hand, older companies tend to pay more dividends to their shareholders since they have reached their growth capacity.

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