# How to Calculate Beginning Dividend Yield

by Dale Bye

Knowing the dividend yield for the stocks you own or are considering to buy gives you a cash-flow return to compare against other types of income investments, such as bonds and certificates of deposit (CDs). Two different ways to compute yield will produce slightly different results.

## Share Price Method

1. Find the price of the company's stock. To get the latest price, go to your brokerage website or a general stock market tracker site, such as Yahoo! Finance or Marketwatch.com. Enter the stock symbol. If you don't know it, search for it. When the stock chart appears, look for "Real Time" or "Last Trade" or any phrase that tells you that you are looking at the stock's latest price. For example, at the time this article was written, the price of Seagate Technology -- ticker symbol STX -- was \$12.06 per share.

2. Get the annual dividend: On the same chart, look for the entry for "Dividend" or "Div." Unless you're familiar with the site you are using, make sure the dividend cited is the annual dividend based on the latest regular dividend payment. For Seagate, that number was \$0.72, which means the company's known forward dividend rate is 72 cents per share annually.

3. Calculate the yield. Divide the dividend amount, 0.72, by the share price, 12.06 to get 0.0597. Move the decimal point two places to the left to get a percentage amount -- 5.97 percent. Compare that against the yield you could get from other investments.

## Investment Amount Method

1. Get the total amount invested. From the trade confirmation or monthly statement, find the total amount you invested, including any commission and fees you paid. For example, 100 shares of Seagate with a \$20 commission at \$12.06 per share, would cost \$1,226.

2. List the dividend payment. From the most recent statement recording the company's dividend payment, find the amount you received. From the example purchase of Seagate, that amount would be \$13. Multiply that quarterly payment by 4 to get the annual dividend amount. If you haven't yet received a dividend payment, multiply the amount listed on the company's online stock chart by the number of shares you own.

3. Calculate the yield. Divide the dividend amount, \$72, by the amount invested, \$1,226 to get 0.0587. Move the decimal point two places left for your percentage amount -- 5.87 percent. This result is a more precise calculation of your yield because it accounts for the actual money you paid to complete the transaction. The commission effectively raised your per share price to \$12.26.

#### Tip

• When you calculate the yield of a stock purchase based on the money you've invested, that yield won't change regardless of any increase or decrease in the company's stock price. For example, if the Seagate price fell to \$11 a share, a stock chart might show the yield as 6.55 percent. But because you paid \$12.06, your yield wouldn't change until the company changes its dividend payment.

#### Warnings

• Don't rely on yields shown on online stock charts for making a purchase. Those yield rates generally are based on a previous day's closing price, not the current price.
• Always make sure you are using the latest stock price when calculating the yield on a potential stock purchase. For example, the day after this article was written, Seagate's price rose steadily throughout the trading period to a closing price of \$15.42, a yield of only 4.67 percent. You would have been disappointed had you bought the stock expecting a 5.97 percent yield.

### Items you will need

• Stock Price
• Dividend amount or Amount you invested/plan to invest
• Number of shares purchased
• Dividend payment
• Computer
• Calculator or computer spreadsheet program