When you invest in stocks, the past doesn’t necessarily equal the future. Although financial news outlets typically report a stock’s trailing dividend yield, it helps to focus more on the forward, or expected, yield to analyze its dividends. The forward dividend yield measures next year’s expected dividends as a percentage of a stock’s current price, whereas the trailing yield uses the previous year's dividends. The forward yield indicates the annual percent return you can expect to earn from dividends if the company keeps up its payouts.
Visit any financial website that provides stock quotes. Type a company’s name or its stock’s ticker symbol into the stock quote text box and click “Get Quote.” A ticker symbol is one or more capital letters that are typically related to a company’s business or name.
Find the stock’s current price near the top of the page.
Click “Key Statistics” or a similar link on the stock’s main quote page to view a list of its important financial metrics.
Identify the forward annual dividend rate in the dividends section of the page. This figure represents the dollar amount of the stock’s estimated dividends for the next 12 months.
Divide the forward annual dividend rate by the stock’s price and multiply your result by 100 to calculate its expected dividend yield as a percentage. For example, assume a stock has a current price of $32.50 and a forward annual dividend rate of $1.20. Divide $1.20 by $32.50 to get 0.037. Multiply 0.037 by 100 to get an expected dividend yield of 3.7 percent. This means that if you bought the stock today, you’d earn a 3.7 percent return over the next year from dividends, excluding any potential stock price changes.
- If a financial website doesn’t show a stock’s forward annual dividend rate, find the stock’s most recent quarterly dividend on the website and multiply by 4. For example, say a company paid a 20 cent dividend per share last quarter. Multiply this by 4 to get a forward annual dividend rate of 80 cents.
- A stock’s dividend payments aren’t set in stone. A company can reduce its dividend payout or yank it completely if it needs to. Fully assess a company’s financial position before investing.
- Comstock/Comstock/Getty Images
- How to Compare Dividend Yields
- How to Calculate a Stock Portfolio Yield
- Does the Value of a Share of Stock Depend on Dividends?
- Does Reinvesting Dividends Change Yield on Cost?
- How to Calculate the 5-Year Average Dividend Yield
- What Is a Stock's Realized Annual Return?
- How to Evaluate Stocks Using DDM
- Differences Between an Expected Rate of Return & a Required Rate of Return