A dividend yield is the cash a stock pays its shareholders over a year, expressed as a percentage of the current share price. It answers one narrow question, how much income each dollar invested at today's price would collect at the current rate of payment, and leaves out price changes, buybacks and any view on whether the payment can last. Because the price sits underneath the dividend in the calculation, the yield moves every trading day even when the dividend does not. The stocks hub covers the shares and funds it is quoted for, and dividend investing basics covers how income investors use it.
How do you calculate dividend yield?
Divide a year of dividends per share by the current share price; the two common versions differ only in which year of dividends goes on top.
Trailing yield, often labeled TTM for trailing twelve months, counts payments that have actually been made. Forward yield, also called indicated yield, annualizes the most recently declared rate and so assumes the board keeps paying it. Both usually leave out one-off special dividends. A company that pays twice a year needs its latest payment multiplied by two, not four, and for an annual payer the last dividend is already the yearly figure. Who receives a payment depends on the record and ex-dividend dates, which dividend dates explained sets out. Live prices for large US companies are on the stocks page, so the forward yield of any of them is one division away.
Funds report income differently. US mutual funds and ETFs quote a standardized 30-day SEC yield, based on income earned after expenses, beside a 12-month trailing figure built from actual distributions. On September 30, 2026, iShares listed 0.95% and 1.10% respectively for its core S&P 500 ETF.
What was Coca-Cola's dividend yield on October 30, 2026?
Coca-Cola's trailing yield was 2.23% and its forward yield 2.25% at the $94.08 close on October 30, 2026, a small gap left by February's dividend increase.
Worked example: Coca-Cola (KO), October 30, 2026
| Payment date | Dividend per share |
|---|---|
| December 15, 2025 | $0.51 |
| April 1, 2026 | $0.53 |
| July 1, 2026 | $0.53 |
| October 1, 2026 | $0.53 |
| Past 12 months | $2.10 |
- Closing price on October 30, 2026: $94.08
- Trailing yield: $2.10 ÷ $94.08 = 2.23%
- Forward yield: $0.53 × 4 = $2.12, and $2.12 ÷ $94.08 = 2.25%
- Next payment: $0.53, declared October 15 and payable December 15, 2026
On February 19, 2026, the board raised the quarterly payment about 4%, from $0.51 to $0.53, the company's 64th consecutive annual increase, so one of the four payments in the trailing window still reflects the old rate. Once the December 15 dividend is paid, the trailing total also reaches $2.12 and the two versions agree until the next increase. The price matters as much as the payout: at $100 a share the same $2.12 would be a 2.12% yield, and at $80 it would be 2.65%.
When do trailing and forward yields disagree?
They part ways whenever the payment changes, and the gap is widest just after a cut, when the trailing figure still counts payments that will not come again.
- After an increase, trailing yield understates the current rate, as in the Coca-Cola example.
- After a cut, trailing yield overstates it. Dow Inc. halved its quarterly dividend from $0.70 to $0.35 on July 24, 2025. On October 30, 2025, with the shares at $23.80, its past 12 months still held three $0.70 payments plus one at $0.35, $2.45 in all, for a trailing yield of 10.3%. The forward yield on $1.40 a year was 5.9%.
- After a special dividend, a trailing figure that includes it overstates the regular income for a year.
- For a first-time payer, there is no trailing history, so only the forward figure means anything.
Data providers do not all pick the same version, so two websites can show different yields for one stock on the same day. Check the label before comparing.
What is a yield trap?
A yield trap is a stock whose yield looks generous only because its price has collapsed, usually because investors expect the dividend to be cut, and which then cuts it.
Worked example: Dow Inc., June 2024 to October 2025
| Date | Share price | Annual dividend rate | Yield at that rate |
|---|---|---|---|
| End of June 2024 | $53.05 | $2.80 | 5.3% |
| June 30, 2025 | $26.48 | $2.80 | 10.6% |
| October 30, 2025, after the cut | $23.80 | $1.40 | 5.9% |
- The yield doubled in a year without any change in the dividend, because the price fell 50.1%.
- On July 24, 2025, Dow cut the quarterly dividend from $0.70 to $0.35, a 50% reduction.
- A buyer at $53.05 collected $3.15 a share in dividends through October 30, 2025 while the price fell $29.25, a total return of about −49% before tax.
The warning signs sat in Dow's own results. In the quarter before the cut it reported a GAAP loss of $1.18 a share and negative operating cash flow of $470 million, yet paid out $496 million in dividends. A payout ratio above 100% and free cash flow that falls short of the dividend are the standard tests of whether a payment is covered.
Whole markets can do the same thing. At the end of 2008, after a 38.5% fall in the S&P 500, the index's trailing yield had climbed to 3.11%, but dividends per index unit then dropped about 20% in 2009, according to Aswath Damodaran's dataset at NYU Stern.
How has the S&P 500's dividend yield changed over time?
The S&P 500's year-end yield has drifted from above 5% around 1980 to roughly 1% today, with the lowest reading in 1999 at the height of the dot-com boom.
| End of year | S&P 500 level | Trailing dividend yield | What moved it |
|---|---|---|---|
| 1960 | 58.11 | 3.41% | First year in the series |
| 1974 | 68.56 | 5.43% | Index fell 29.7% in the year |
| 1981 | 122.55 | 5.57% | Highest year-end yield in the series |
| 1999 | 1,469.25 | 1.14% | Lowest year-end yield in the series |
| 2008 | 903.25 | 3.11% | Index fell 38.5% in the year |
| 2021 | 4,766.18 | 1.24% | Prices well ahead of dividends |
| 2025 | 6,845.50 | 1.15% | Second-lowest year-end yield in the series |
The figures are trailing dividends divided by the year-end index level, as compiled by Damodaran. A low yield can reflect high prices as much as stingy companies: S&P Dow Jones Indices reported that S&P 500 dividends reached a record $78.92 per index share in 2025, the 16th straight annual increase, yet the year ended with one of the lowest yields in the table because prices rose faster. The firm put the index's indicated yield at 1.16% at the end of 2025, or 1.39% counting only the 409 members, 81.3% of the index, that paid a dividend. Companies also hand back cash through buybacks, which no dividend yield counts. What is the S&P 500 covers what the index holds.
How does dividend yield compare with other yields?
Dividend yield measures a share's cash income against its price; related measures change the numerator, the denominator or the period covered.
| Measure | Calculation | What it shows |
|---|---|---|
| Dividend yield | Annual dividends ÷ current price | Income per dollar invested today |
| Yield on cost | Annual dividends ÷ the price you paid | How far the payout has grown on your purchase |
| Current yield (bonds) | Annual coupon ÷ bond price | A bond's income against its price |
| Earnings yield | Earnings per share ÷ price | Profit per dollar of price, paid out or not; the inverse of P/E |
| 30-day SEC yield (funds) | 30 days of net investment income, annualized, ÷ price | A fund's standardized income after expenses |
| Total return | Price change plus income | What the holding actually earned |
The bond counterpart is current yield: both divide yearly income by price, but a coupon is fixed by contract while a board can cut a dividend at any meeting. Earnings yield is the P/E ratio turned upside down, which the P/E ratio explained works through. Only total return shows whether a high yield paid off once the price change is counted.
What do people get wrong about dividend yield?
The commonest error is reading a high yield as a high return; the others come from mixing versions or forgetting what actually reaches the investor.
- Mixing versions. One stock's trailing yield set against another's forward yield is not a fair comparison, least of all after a raise or a cut.
- Counting a special dividend. A one-off payment can inflate a trailing yield for a full year.
- Forgetting withholding. A US dividend paid to a foreign investor loses tax at source, 30% on US-source dividends, unless a tax treaty sets a lower rate, so the yield received falls below the yield quoted.
- Annualizing the wrong number. Multiplying by four works only for quarterly payers; many companies outside the US pay once or twice a year.