The dividend yield is a financial measure that compares the number of cash dividends paid to ordinary stockholders to the value of the shares. This metric is used by investors to show how their stock investments are generating cash flows through increases in stock value, as well as dividends. Investors invest in stocks in order to earn a return through dividends or stock gains. Some companies choose to distribute dividends on a regular basis as a way to attract investors' attention. These stocks are often referred to as income stocks. Some companies choose not to pay dividends and instead reinvest the money back into the business. Growth stocks are often referred to as such.

Investors can calculate their return on investment in equities using the dividend yield formula.

Dividend yield is a measure of the income generated from an investment relative to the price paid for the investment. Dividends are the payments from a company to its shareholders, and a dividend yield is a ratio of a number of dividends to a share price. The lower the ratio, the more attractive that investment is to investors.

A dividend yield is the annualized percentage of the total return of a security, which consists of both income and price appreciation, paid out in dividends.