# How to Calculate Interest on Corporate Bonds & Dividends

by C. Taylor

Corporate bonds and dividends work very differently. Bonds issue an annual simple interest payment, which is calculated by the coupon yield. This coupon yield is essentially the interest rate earned by the bond. Dividends are a fixed distribution of profits for owned stocks. Stocks that offer dividends pay a set amount per share. The amount earned by the dividends is called the dividend yield, which is a function of the dividend payment and the current stock price.

## Corporate Bond Coupon Yield

1. Reference the annual payment offered by the corporate bond. This information can be acquired from the annual payment statement, or your investment broker.

2. Divide the annual payment by the face value of the bond. As an example, if you received \$50 per year on a \$1,000 bond, you would divide \$50 by \$1,000 to get 0.05.

3. Multiply by 100 to convert to a percentage. In the example, you would receive a coupon yield of 5 percent.

## Dividend Yield

1. Ask your investment broker for the annual dividend payment per share and the current stock price.

2. Divide the annual dividend payment by the current stock price. As an example, if you were paid a \$3 annual dividend and the stock's price was \$50, then you would divide \$3 by \$50 to get 0.06.

3. Multiply by 100 to calculate the dividend yield percentage. In the example, you would receive a 6 percent dividend yield.

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