Dividends are a way of distributing corporate profits to stock investors. These dividends are paid at a predetermined, fixed amount multiplied by the number of shares an investor owns. Dividend yield describes the dividend payment in terms of the current stock price. A high dividend yield means you receive large dividend payments for a relatively small stock investment. As an example, a 20 percent dividend yield on a $30 stock means you receive $6 in annual dividends for each share you own. Exercise caution when purchasing high-dividend-yield stocks, because some companies entice investors with high dividend yields, even though they have no proven track record for payments or dividend increases.
1. Multiply the dividend yield by the current stock price to calculate the annual dividend. In the example, multiplying the $30 stock by its 20 percent dividend yield, or 0.20, calculates an annual dividend of $6 per share.
2. Multiply the annual dividend by the number of shares you own to calculate the annual dividend payment. If you owned 100 shares of the example stock, you would receive $600 annually in dividends.
3. Divide the annual dividend payment by the number of payments each year to calculate the periodic dividend payment. If the example stock paid quarterly, divide $600 by 4 to calculate quarterly dividend payments of $150.
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