Dividend

A dividend is a share of profits and retained earnings a company usually pays out to its shareholders, after it’s used a portion to reinvest in the business.

A dividend is often regarded as a measurement of a company’s health and good management. Mostly profitable or cash rich firms pay out dividends and some investors rely on these annual returns for investment income.

Dividend yield meaning

Dividend yield is a financial ratio that measures a company's annual dividend payments relative to its share price. It is usually expressed as a percentage and is calculated by dividing the annual dividend per share by the current share price.

A company's total annual dividend payments are divided by its market capitalisation if the number of shares remains constant.