# What does the dividend yield mean and how to calculate it?

Whenever the market enters the middle and late bear market, "dividend yield" will be mentioned by the major financial media. This is the law of thinking of the market, just as investors in a bull market talk about rising share prices, while investors in a bear market talk about dividends and net assets per share.

"Dividend" is one of the important means of dividend of listed companies, so it is very necessary for investors to understand the value of dividend yield (including investment value, reference value), calculation method, etc. Let's get to know what dividends are

Definition of dividend yield

The dividend yield is the ratio of the total dividend paid in a year to the market value at that time, and the ratio between the dividend and the stock price.

The calculation formula of dividend yield: dividend yield = dividend per share / share price, so the dividend yield is dynamic and closely related to the current dividend payout and the price investors buy. For example, if company a pays 0.5 yuan per share in a certain year, and the price investors buy at that time is 10 yuan / share, then the current dividend yield is (0.5 yuan / share) / (10 yuan / share) * 100% = 5%. From the formula, it is not difficult to see that the amount of dividend per share is determined by the listed companies, so the better the profitability of listed companies, the higher the probability of annual dividend distribution, the higher the number of dividend payments, and the higher the corresponding dividend yield; while the purchase price is determined by investors, the lower the purchase price, the higher the corresponding dividend yield.

This also answers a question, "why is the dividend yield mentioned more and more often in the middle and late bear market?" Because the stock price comes down, the dividend yield will rise. Compared with the fixed deposit of n-year period, the return of dividend yield is much richer.

How to treat the dividend after dividend distribution?

Most investors who are new to the stock market don't understand why they have to pay dividends after dividend payment. They complain that after the dividend is removed, the share price decreases. As a result, the total market value of the investors holding the shares has not increased, on the contrary, due to the deduction of dividend tax, the total market value has decreased. This is because after the listed companies pay dividends again, the actual assets of listed companies have decreased. In view of this situation, the exchange deals with the stock market value, that is, the stock price corresponding to the dividend amount is actually a kind of addition and subtraction method, so that the total amount is zero. Otherwise, the market value will not change after the cash dividend, and the market value will be higher and higher. After ex dividend, the number of stocks and the equity of investors remain unchanged.

How to treat dividend income?

This can be seen from two aspects. On the one hand, the income is the interest of the continuous dividend of the listed company. Assuming that the annual dividend of company a can reach 0.5 yuan per share (year), when investors buy the shares of company a, the stock price is 10 yuan per share, buying 10000 shares means investing 10000 yuan. Then the investor's principal will be returned in 20 years by way of dividend, and the company's shares will still be retained. On the other hand, the earnings come from the par value of the stocks held. Suppose that after 20 years, the company's shares will rise to 20 yuan per share. Then the current total market value of investors is 20 yuan / share * 10000 shares + 20 years * 0.5 yuan / share (year) * 10000 shares - 100000 yuan (principal) = 200000 yuan (this does not consider the reinvestment after dividend, only for holding, so please do not use compound interest to calculate annualized income). Therefore, in fact, there are two benefits of holding stocks, one is equity income, the other is from the value appreciation of Listed Companies in the market. Only when there is a good return on both sides of the income, there will be greater income.

High dividend yield is not equal to high return

Dividend yield is an important reference standard for selecting yield stocks. It can reflect the prospect of investors' cash investment under specific conditions better than P / E ratio. But a high dividend does not mean a high return, which also needs to be said in two aspects. The first aspect is the risk from the market. The stock market is volatile. A high dividend yield does not necessarily mean that the current stock price will be recognized. When a stock is not recognized by investors, the loss caused by the decline of stock price may be greater than the income from cash dividends. This makes the sum of the returns negative. On the other hand, the current high dividend does not represent a high dividend in the future. From the formula of dividend yield, we can see that the dividend rate is calculated by the dividend of the latest year and the current stock price. In fact, some listed companies do not pay cash dividends every year, or some listed companies have different cash dividends per share every year. Therefore, we need to emphasize once again that "dividend yield" is only a reference index, not a sufficient condition for absolute return. When choosing investment targets, investors should not only consider the cash return, but also consider the development prospect, industry prospect and current market trend of the investment target.

In recent years, China Securities Regulatory Commission has also issued a series of measures to require listed companies to strengthen the proportion of dividends. On the one hand, because the listed companies "iron roosters" do not pay dividends, on the other hand, hope to improve the investment value of A-share market through policy means.

Query method of dividend yield

At present, there are not many ways to query the dividend yield free of charge in the market. The better one is the dividend yield query page provided by the CSI, which not only provides the query of individual stocks, but also provides the latest data of the overall dividend yield of the market.

"Dividend" is one of the important means of dividend of listed companies, so it is very necessary for investors to understand the value of dividend yield (including investment value, reference value), calculation method, etc. Let's get to know what dividends are

Definition of dividend yield

The dividend yield is the ratio of the total dividend paid in a year to the market value at that time, and the ratio between the dividend and the stock price.

The calculation formula of dividend yield: dividend yield = dividend per share / share price, so the dividend yield is dynamic and closely related to the current dividend payout and the price investors buy. For example, if company a pays 0.5 yuan per share in a certain year, and the price investors buy at that time is 10 yuan / share, then the current dividend yield is (0.5 yuan / share) / (10 yuan / share) * 100% = 5%. From the formula, it is not difficult to see that the amount of dividend per share is determined by the listed companies, so the better the profitability of listed companies, the higher the probability of annual dividend distribution, the higher the number of dividend payments, and the higher the corresponding dividend yield; while the purchase price is determined by investors, the lower the purchase price, the higher the corresponding dividend yield.

This also answers a question, "why is the dividend yield mentioned more and more often in the middle and late bear market?" Because the stock price comes down, the dividend yield will rise. Compared with the fixed deposit of n-year period, the return of dividend yield is much richer.

How to treat the dividend after dividend distribution?

Most investors who are new to the stock market don't understand why they have to pay dividends after dividend payment. They complain that after the dividend is removed, the share price decreases. As a result, the total market value of the investors holding the shares has not increased, on the contrary, due to the deduction of dividend tax, the total market value has decreased. This is because after the listed companies pay dividends again, the actual assets of listed companies have decreased. In view of this situation, the exchange deals with the stock market value, that is, the stock price corresponding to the dividend amount is actually a kind of addition and subtraction method, so that the total amount is zero. Otherwise, the market value will not change after the cash dividend, and the market value will be higher and higher. After ex dividend, the number of stocks and the equity of investors remain unchanged.

How to treat dividend income?

This can be seen from two aspects. On the one hand, the income is the interest of the continuous dividend of the listed company. Assuming that the annual dividend of company a can reach 0.5 yuan per share (year), when investors buy the shares of company a, the stock price is 10 yuan per share, buying 10000 shares means investing 10000 yuan. Then the investor's principal will be returned in 20 years by way of dividend, and the company's shares will still be retained. On the other hand, the earnings come from the par value of the stocks held. Suppose that after 20 years, the company's shares will rise to 20 yuan per share. Then the current total market value of investors is 20 yuan / share * 10000 shares + 20 years * 0.5 yuan / share (year) * 10000 shares - 100000 yuan (principal) = 200000 yuan (this does not consider the reinvestment after dividend, only for holding, so please do not use compound interest to calculate annualized income). Therefore, in fact, there are two benefits of holding stocks, one is equity income, the other is from the value appreciation of Listed Companies in the market. Only when there is a good return on both sides of the income, there will be greater income.

High dividend yield is not equal to high return

Dividend yield is an important reference standard for selecting yield stocks. It can reflect the prospect of investors' cash investment under specific conditions better than P / E ratio. But a high dividend does not mean a high return, which also needs to be said in two aspects. The first aspect is the risk from the market. The stock market is volatile. A high dividend yield does not necessarily mean that the current stock price will be recognized. When a stock is not recognized by investors, the loss caused by the decline of stock price may be greater than the income from cash dividends. This makes the sum of the returns negative. On the other hand, the current high dividend does not represent a high dividend in the future. From the formula of dividend yield, we can see that the dividend rate is calculated by the dividend of the latest year and the current stock price. In fact, some listed companies do not pay cash dividends every year, or some listed companies have different cash dividends per share every year. Therefore, we need to emphasize once again that "dividend yield" is only a reference index, not a sufficient condition for absolute return. When choosing investment targets, investors should not only consider the cash return, but also consider the development prospect, industry prospect and current market trend of the investment target.

In recent years, China Securities Regulatory Commission has also issued a series of measures to require listed companies to strengthen the proportion of dividends. On the one hand, because the listed companies "iron roosters" do not pay dividends, on the other hand, hope to improve the investment value of A-share market through policy means.

Query method of dividend yield

At present, there are not many ways to query the dividend yield free of charge in the market. The better one is the dividend yield query page provided by the CSI, which not only provides the query of individual stocks, but also provides the latest data of the overall dividend yield of the market.

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