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Dividend Yield Calculation - Figuring out a Company's Distribution to Shareholders

By Edited Jul 2, 2015 0 0

Do you know how to figure out the dividend yield calculation of how much a stock pays out in dividends to their shareholders? If you are an investor that loves to buy stocks that pays you to own it, then you must understand how to calculate the stocks yield. Thankfully this is easy to do and you can also find it online in most cases. If you can’t find it online, however, you can do it yourself easily.

This measurement will tell you what percentage of money a company pays to its shareholders in the form of dividends. In general, the higher the percentage, the better, although I would stay away from companies that pay very high yields because they might be too risky if their payout ratio is too high.


To calculate the dividend yield, you simply divide the company’s annual dividend paid per share with the stock’s price per share.

For example, if a company pays out $1 a year in dividends, and the stock is $20, then the dividend yield is 5 percent.

You can also figure out the stocks future dividend yield based on future earnings and dividend payout estimates.

For instance, if the company has a solid track record of paying dividends and has increased them 10 percent a year for the last 5 years, you might assume that this will occur next year.

So assuming the dividend for the full next year will be $1.10 and the company’s stock price does not increase, the future dividend yield rate is 5.5 percent (1.10 dividend divided by $20 stock price).

Dividend Tax Calculator 2013

Are you also wondering how much you’re expected to pay on dividends? Specifically,  What dividend tax rates are for 2013 and beyond after the Fiscal Cliff deal?

- Dividend taxes for those earning less than $450,000 a year will remain at 15%.

- For those earning more than $400,000 a year, the tax rate jumped from 15 percent to 20 percent in 2013.

Salary or Dividend?

It’s clear that if you’re someone who has a lot of money in assets like stocks, it’s simply not worth working from a tax standpoint as you’ll pay 20 percent or less in taxes from dividends, vs. salary with over 40 percent in taxes you'll have to pay.

If you are investor who maybe isn’t quite wealthy enough yet to live off of dividends, you should definitely plan for the future and get inspired to pay yourself more from dividends.

The tax advantage is big, to say the least.

Dividend Increases - The Best Monthly Dividend Stocks

I write a lot about stocks and ETFs that pay dividends monthly because I find it much more convient to get dividends this way, as opposed to getting them quarterly or semi-annual;y, or eve annually.

Many of these companies also have high yields that are sustainable. Besides ETFs, check out some of the best stocks that pay dividends monthly.

Hopefully this article has helped you figure out the dividend yield calculation formula and figuring out a company's distributions to shareholders.



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