The stock market is often looked at a place where the prices go up and down.
However, there is more to investing than just looking at those numbers. While those numbers play a role and do illustrate the current value of the stock, there are underlying figures that have to be accounted for as well.
These numbers include the “dividend yield” because it has an extended benefit to offer financially. Let’s take a look at what this yield is all about and why investors like Stony Brook Securities pay attention to it while they are investing one way or the other.
What Is It in Finance?
The dividend is a figure used to represent how much the company pays back to its shareholders during a set period for investing in them.
While the dividend yield is a ratio that is developed to illustrate how much of the share price is being paid in the form of dividends to shareholders. The formula is Annual Dividends Per Share/Price Per Share.
Benefits of Dividend Yield
So, why do people or investors want to know this figure? Why are they calculating it in the first place? This is the question most beginners will ask as they start to note down this figure with major companies around the world.
The premise of the dividend yield is to illustrate how much money you are getting per dollar spent on the share. This will tell you whether you are getting a good return on investment or not. Remember, the regular share price is just one part of the puzzle.
You will want something that provides real value in the short-term too. This is where the yield helps in clarifying how things are going and what adjustments might have to be made moving forward. It can also shed light on how the company is doing as a whole.