Dividend Yield Explained

Dividend Yield Explained

This video will teach you what dividend yield is, how to calculate it and why it’s important. Dividend yield is the dividend, relative to the price of the investment.

What are dividends? Check out the previous video: https://www.youtube.com/watch?v=8s_8O99dNC0

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Didn’t hear me properly? This is what I was saying:

Today we’re going to be learning what dividend yield is. We already know what a dividend is from the previous video, now we just need to know the yield part. If you don’t know what a dividend is, just click on the word dividend to watch the previous video, and then come back to this video.
Let’s use the hypothetical company from the last video, Soni’s Shawarma. Soni’s Shawarma is a restaurant chain that has thousands of restaurants across the country, and obviously, sells shawarmas.
Soni’s Shawarma pays a quarterly dividend of $0.25. Which means in a year, it pays a total dividend of a dollar, since 25 cents every 3 months adds up to a dollar every year.
So we know how much Soni’s Shawarma pays in dividends for every share that we own, but we don’t know how much it costs to buy one share of Soni’s Shawarma. What if I told you that one share of Soni’s Shawarma costs $1000. Yes, $1000 to buy 1 share of Soni’s Shawarma, and it only pays us one dollar in dividends every year. What if I told you that one share of Soni’s Shawarma costs only $20. $20 for one share, and it pays us one dollar in dividends every year.
Which one would you rather pick? I would pick the $20 share that pays me $1, instead of the $1000 dollar share that pays me $1. Why, because it has a greater yield! Yield is simply the dividends we get, relative to the price of the share. That’s not a dictionary definition, it’s my definition for this case. So now let’s calculate the yield of these two options, let’s start with the $1000 share.
If one share of Soni’s Shawarma costs $1000 and In one year, it gives us one dollar, the annual dividend is one dollar. So to calculate the yield, we need to take the dividend, and divide it by the price. So the dividend of one dollar, divided by the price of $1000, equals 0.001, which can also be expressed as 0.1%. So the dividend yield in this case is 0.1%. Now let’s move on to the next case.
If one share of Soni’s Shawarma costs $20 and in one year, it gives us one dollar, the annual dividend is one dollar. Just like before, to calculate the yield, we take the dividend and divide it by the price. So the dividend which is one dollar, divided by the price, which is $20, equals 0.05, which is another way of saying 5%.
So that’s dividend yield, the dividend relative to the price. The $20 share has a yield of 5%, that means I’ll be getting 5% of the money I paid every year. It means 5% of the price, will be paid to me in dividends. With the $1000 share which has a yield of 0.1%, it means I’ll be getting 0.1% of the money I paid, every year. It means 0.1% of the price, will be paid to me in dividends.
So which one would you rather pick? Would you rather have your dividends equal 5% of the price you paid, or would you rather have them equal only 0.1% of the price you paid. I would rather have them equal 5% of the price I paid, because I get more money relative to the price I paid. If we’re only looking at dividends, paying $20 to get an annual dividend of $1, is better than paying $1000 to get that same annual dividend of $1.
Remember, stock prices change every day, so that means, dividend yield will also change every day. If its $20 to buy a share that has an annual dividend of $1, it has a yield of 5%. If tomorrow, the price of that same share goes up to $21, then we divide 1 by 21 to get a yield of 4.76%. So as prices change, so does the yield, as dividends change, so does the yield.
So now you know what dividend yield is, how to calculate it, and why it’s important. If you liked this video, please make sure to hit that subscribe button. Thank you.

50 Comments

  1. DESTRAKON on November 26, 2022 at 2:44 pm

    This is gonna sound kinda dumb but is a 30 day yeild like a monthly payment?



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  3. Candice G on November 26, 2022 at 2:47 pm

    Great explanation!! Question: Lets say the share price increases, and the yield decreases…Does that mean the shareholder will get that new yield percentage of the amount of money they put in? Or will they get the new percentage of the new share price that it increased to?



  4. Alireza Asadi on November 26, 2022 at 2:47 pm

    Thanks. Great video. Sorry for the long question. Let us look at two scenarios: Scenario 01: the company grows well YoY and the share price goes up, but dividend yield grows a little or none; Scenario 02: The company does not do well and the share price keeps going down (e.g., China Mobile Ltd.) but the dividend yield grows YoY by some %; Now comes the question: What is your opinion regarding the following observation: In scenario 01, my return would be via share price growth mainly which is also called return via "Earnings" (Have I used Earnings word in the right position?) and return from dividend will go down unless the company makes improvement on that or I buy more shares; In scenario 02:my return would be via dividends and as the share price goes down, I can buy more shares and increase my return; Do you agree with this conclusion?



  5. Random Smart Stuff on November 26, 2022 at 2:48 pm

    "What if I told you that 1 share cost 1000 dollars?"

    I’d tell you he’s a fucking con man that’s what



  6. BigHomieReg on November 26, 2022 at 2:52 pm

    THANK YOOOUUUU!!!!!!



  7. Rusty Shackleford on November 26, 2022 at 2:52 pm

    Great explanation ๐Ÿ‘๐Ÿพ



  8. Asad Rashid on November 26, 2022 at 2:55 pm

    Can this video be made without background music? Any votes?



  9. Won-Kyu Lee on November 26, 2022 at 2:55 pm

    Perfect explanation, thanks,



  10. ActressAngie on November 26, 2022 at 2:57 pm

    U DA BEST!!!! Thank you!!



  11. GryphonFootball2019 on November 26, 2022 at 2:58 pm

    Wow!!! This is the best video I’ve seen explaining how the yield is affected by the share price. Price goes up, yield (%) goes down. I guess it’s better/easier to look at the dollar amount of the dividend that each share will pay you.



  12. Goose on November 26, 2022 at 2:59 pm

    I’m looking at a stock, its ticker is RVI, it’s dividend is 3.23 or something like that, but the yield is 0.00 %, yes the stock price has dropped almost to its 52 week lowest, but why would the yield be listed as zero?



  13. Pratik Mehta on November 26, 2022 at 3:00 pm

    Excellent ๐Ÿ‘๐Ÿป



  14. Dharmen Joshi on November 26, 2022 at 3:01 pm

    Please guide, if i want to buy share (Equity), what are the points we have to look & calculate



  15. Duc Ba on November 26, 2022 at 3:03 pm

    Wow! That’s such a great explanation. Really impressive and truly easy to understand! Thanks.



  16. Tygr Allure on November 26, 2022 at 3:04 pm

    Thanks! Made this very easy to understand.



  17. daytonpyro on November 26, 2022 at 3:05 pm

    so why would you buy the 1000 share when you can buy the 20 dollar share with same or more dividend return?



  18. Diwash shrestha on November 26, 2022 at 3:07 pm

    very good explanation



  19. Don Luedetmoonsone on November 26, 2022 at 3:10 pm

    Clearly explain. Thanks



  20. Jaswanth Sai on November 26, 2022 at 3:10 pm

    Karunya students attendence here….



  21. deezel 365 on November 26, 2022 at 3:11 pm

    This is so awesome and very well explained.. thank you ๐Ÿ™



  22. Giannis Antetokounmpo on November 26, 2022 at 3:16 pm

    So does dividend increase with increasing share price?



  23. JP C. on November 26, 2022 at 3:16 pm

    Excellent explanation. thank you so much. I learned something new today. I will buy KO next time hehe



  24. David Guzman on November 26, 2022 at 3:18 pm

    Great teacher, thank you!



  25. ๆฑŸๆน–ไบบ็จฑใ„šห‡ๅก”Talia on November 26, 2022 at 3:22 pm

    Understand now,thx๐Ÿ˜€



  26. Shadowwind4 on November 26, 2022 at 3:22 pm

    Thanks โ˜บ๏ธ



  27. evelyn e on November 26, 2022 at 3:22 pm

    great however music background its loud ๐Ÿ™‚



  28. Vivian Tran on November 26, 2022 at 3:23 pm

    Wow ๐Ÿ‘ ty so much!



  29. Beats by arvin on November 26, 2022 at 3:23 pm

    Currently studying CISI UK and was struggling to understand but this explanation is so simple and easy to understand ๐Ÿ‘๐Ÿป๐Ÿ‘๐Ÿป๐Ÿ‘๐Ÿป๐Ÿ‘๐Ÿป



  30. Subash Gaire on November 26, 2022 at 3:24 pm

    What about the stock dividend in calculation of Dividend Yield?



  31. Topher Meza on November 26, 2022 at 3:24 pm

    Finally a video simplifying this topic for my stoopid brain.



  32. NeuroMD on November 26, 2022 at 3:24 pm

    Thank you for this video and information.



  33. avelrage on November 26, 2022 at 3:26 pm

    Thank u for the vid.
    I am new on this and have a question:
    If the stock is worth more why the yield would be less?



  34. TheRedCelt on November 26, 2022 at 3:29 pm

    Do you think your viewers are retarded? Because you teach this video like your audience has an average IQ in the 80โ€™s. Itโ€™s insulting.



  35. Papa Bear on November 26, 2022 at 3:31 pm

    Cool



  36. Will Mallory on November 26, 2022 at 3:32 pm

    Excellent video Brother. New subscriber.



  37. 84xyzabc on November 26, 2022 at 3:32 pm

    Bad example. Even without calculating yield.. A moran would buy at 20 dollars.



  38. Young African Daws on November 26, 2022 at 3:33 pm

    Straight forward I like it.



  39. Alessandro Terracciano on November 26, 2022 at 3:34 pm

    So no matter what the price per share..the bigger the yeld the more we get back ?



  40. Jasprit Kaur on November 26, 2022 at 3:35 pm

    Beautifully explained



  41. E Adevokhai on November 26, 2022 at 3:35 pm

    thank you



  42. BYA Loxe on November 26, 2022 at 3:36 pm

    Bro I’m beginning what is" share price " example … Thank you



  43. SuperDaddyChris on November 26, 2022 at 3:38 pm

    Thank u for this



  44. Brian Kraemer on November 26, 2022 at 3:39 pm

    You should be a teacher, man. I really enjoyed how clearly and simply you expressed yourself without sounding condescending. You just sounded clear. I really appreciate this because too many people say things like, "Let me make this easy for you," or "Let me say it in a way that anyone can understand," or other such things. Thanks for your efforts and I hope you have more videos. ๐Ÿ™‚



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  46. Stacy Madson- Jensen on November 26, 2022 at 3:41 pm

    20 YouTube videos later and I finally get it after this one ๐Ÿ™ thank you so much



  47. Jake Jessen on November 26, 2022 at 3:42 pm

    Does this also apply to etf?



  48. Martin365 on November 26, 2022 at 3:43 pm

    u just made it worst!



  49. Tim Sleppy on November 26, 2022 at 3:43 pm

    Great video. To the point. Perfect examples.



  50. 6ugust on November 26, 2022 at 3:44 pm

    What if the stock market Fluctuates ? I brought at $6 now the stock is at 5. Is the yield the price I paid for the stock or the price of the market ?