What Is Dividend Yield? — In Plain Words
This page explains one number: dividend yield. It is about the number itself — what it measures and how it is figured. It does not teach what a dividend is all over again, and it does not teach earnings per share. Those have their own pages, linked at the bottom.
Every fact on this page comes from two official sources only: Investor.gov, which is the U.S. Securities and Exchange Commission’s site for individual investors, and FINRA, the Financial Industry Regulatory Authority. The FINRA source is its “Evaluating Performance” page, with one caution from FINRA’s “Stocks” page. The Investor.gov sources are its glossary entries for “Dividend” and “Yield.”
Where the two sources say things in different words, or cover different points, this page prints each one separately, with its source named. It does not merge them into one blended definition. One gap is stated right up front: Investor.gov’s glossary has no entry for “Dividend Yield” itself. What that means for this page is explained in its own section below.
Short answer: FINRA says yield is typically expressed as a percentage, and that for stocks, yield is calculated by dividing the year’s dividend by the stock’s market price. FINRA adds: if a stock doesn’t pay a dividend, it has no yield.
This page is general information only. It is not financial advice.
What FINRA says yield is
FINRA’s “Evaluating Performance” page lists yield as one of its performance measures. Its general sentence is: “Yield is typically expressed as a percentage. It’s a measure of the income an investment pays during a specific period, typically a year, divided by the investment’s price.”
The same page then gives the stock version, under the heading “Yields on Stocks”: “For stocks, yield is calculated by dividing the year’s dividend by the stock’s market price. Of course, if a stock doesn’t pay a dividend, it has no yield.”
So, in FINRA’s words, the dividend yield of a stock is the year’s dividend divided by the stock’s market price, and the answer is typically expressed as a percentage.
What Investor.gov’s glossary does — and does not — say
Gap disclosed: Investor.gov’s glossary has entries for “Dividend” and for “Yield,” but no entry for “Dividend Yield.” The address for a dividend-yield entry leads to the glossary’s main page instead. So the stock-yield definition on this page rests on FINRA, and Investor.gov’s two nearby entries are printed here exactly as they stand, in their own sections, without being combined into a definition Investor.gov never printed.
Investor.gov’s glossary entry “Dividend” says: “A portion of a company’s profit paid to shareholders. Public companies that pay dividends usually do so on a fixed schedule although they can issue them at any time. Unscheduled dividend payments are known as special dividends or extra dividends.”
Investor.gov’s glossary entry “Yield” says: “The annual percentage rate of return earned on a bond calculated by dividing the coupon interest rate by its purchase price.” Read it carefully: that sentence is written about a bond — its words are “coupon interest rate” and “purchase price” — and this page does not turn it into a statement about stocks. It is printed here so the gap is visible: the SEC’s glossary, as read for this page, defines “yield” for bonds and does not define “dividend yield” for stocks.
Where the sources differ: FINRA gives a general yield sentence for investments and then a stock-specific one (the year’s dividend divided by the stock’s market price). Investor.gov’s glossary gives no dividend-yield entry at all, and its one “Yield” entry is written about bonds. The two are printed above, separately, exactly as each source states them. This page does not average them, merge them, or present Investor.gov as defining a term it does not define.
Why there is no worked example on this page
No worked example is printed, on purpose. Neither source read for this page works a dividend-yield example with numbers. FINRA’s “Evaluating Performance” page does work one example with numbers, but it measures something else: a total percent return. In that example, an investor buys 100 shares at $20 a share, the price rises to $25 a share over three years, and the company pays a total of $120 in dividends across those three years, for a percent return of 31 percent. The $120 in that example is three years of dividends added together, inside a return calculation — it is not “the year’s dividend” in FINRA’s yield sentence, and printing it here as a yield example would mislabel it. This page does not invent a replacement example, and it does not borrow numbers from non-official sites.
Reading the number carefully
Two cautions, each from the sources read.
First, the price is part of the math. FINRA’s formula divides by the stock’s market price, and stock prices change. The same dividend divided by a different price gives a different percentage. That is arithmetic from FINRA’s own formula, printed here as arithmetic — this page makes no claim about why any price moved.
Second, the dividend itself can change. FINRA’s “Stocks” page says of common stock: “The issuing company may pay dividends, but it doesn’t have to. If it does, the amount of the dividend isn’t guaranteed, and the company can cut the amount of the dividend or eliminate it altogether.” A yield figure is figured from the dividend in the formula, so a cut or an elimination changes the number — and if there is no dividend, FINRA’s sentence above applies: the stock has no yield.
No “good yield” line exists on this page. Neither Investor.gov nor FINRA, on the pages read, states a yield percentage that counts as good, typical, high, or safe, and this page does not add one. A bigger percentage is not called better anywhere in the sources read, and this page does not call it better either.
Related pages
What a dividend itself is — who decides it, the dates that matter, and why a company might not pay one — is taught on its own page: What Is a Dividend? — In Plain Words. What earnings per share means is taught on its own page: What Is EPS (Earnings Per Share)? — In Plain Words. This page does not repeat either lesson; it covers only the yield number.
Sources
FINRA — “Evaluating Performance.” https://www.finra.org/investors/investing/investing-basics/evaluating-performance The yield definition, the stock-yield sentence, and the no-dividend-no-yield sentence all come from this page, as does its percent-return example, which this page describes but does not use as a yield example.
FINRA — “Stocks.” https://www.finra.org/investors/investing/investment-products/stocks The caution that a company may pay dividends but doesn’t have to, and that the amount isn’t guaranteed and can be cut or eliminated, comes from this page.
Investor.gov (U.S. Securities and Exchange Commission) — Glossary: “Dividend.” https://www.investor.gov/introduction-investing/investing-basics/glossary/dividend
Investor.gov (U.S. Securities and Exchange Commission) — Glossary: “Yield.” https://www.investor.gov/introduction-investing/investing-basics/glossary/yield This entry is written about bonds, as the page above states.
Gap note: Investor.gov’s glossary was checked for a “Dividend Yield” entry at the time this page was built. No such entry was found; the dividend-yield address leads to the glossary’s main page. That is why the stock-yield definition on this page rests on FINRA.
Checked November 2026
This page is general information only. It is not financial advice.
Only the company’s own filings and the sources above can speak to a specific stock. This page decides nothing about any stock.