Dividend Yield Ratio

The Dividend Yield ratio can be helpful when looking for income producing stocks. This ratio simply tells you how much dividends a stock is paying off for the price of the stock.

(Annual Dividends Per Share) / (Price Per Share)

Say stock XYZ is trading at $50 and its annual dividends are $3 then stock XYZ has a dividend yield of 6%. This is in addition to the appreciation of the stock.

Certain companies and ETFs pay off good dividends because it helps their tax situation. That can actually help the individual investor. In fact some studies suggest that dividends pay off as much as 97% of the profit the average investor can expect to make in the market.

It is important not to let the amount of dividends a company pays off destroy your judgment. Getting into a stock just because it pays high dividends can be a fatal move.