uTrade AlgosDividend Yield Calculator
Want to start dividend investing? Use Share India’s dividend yield calculator to calculate the dividend returns you generate on your investment.
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What is a Dividend Yield Calculator?
Before we delve into understanding what a dividend calculator is, we first need to understand the concept of dividend and dividend yields. In simple words, a dividend is simply a portion of the company’s profits distributed to its shareholders. The company distributes a portion of its profits to its shareholders to reward them for being investors in the company. So, dividends contribute to the shareholder’s return of investment. Delivery trading is a type of trading in which traders buy shares and keep them for a long time. This period can last for two days, a week, a month, or a year. In this way of trading, there is no time limit on when the shares can be sold. You can call it a delivery trade as long as the shares are sent to the linked Demat account.
On the other hand, is the ratio of the company’s annual dividend per share (DPS) to the market price of the stock. Don’t confuse the dividend yield with the dividend payout ratio, which is the ratio of the DPS to EPS (Earnings Per Share) of the company. So, essentially the dividend yield is calculated dividing the company annual dividends by its current market price. So for example, if the company’s share price trades at Rs.100, and the annual DPS is Rs.5, then the dividend yield is 5%.
However, this gives you the company’s current dividend yield, and this data is anyway made public by the company. However, what’s your dividend yield? What is your return on investments generated by dividends received? So, to calculate your dividend ratio, you divide the annual dividend with your average purchase price.
However, this gives you the company’s current dividend yield, and this data is anyway made public by the company. However, what’s your dividend yield? What is your return on investments generated by dividends received? So, to calculate your dividend ratio, you divide the annual dividend with your average purchase price.
Now, this data is something you have to calculate by yourself, and this where a dividend calculator comes in: it helps you calculate your dividend yield.
How to Calculate Dividend Yield ?
The manner in which Share India’s dividend calculator functions is straightforward. You only have two variables: the annual dividend received and your purchase price. Using these two variables, you can instantly calculate the dividend of any stock. Going back to the dividend yield example illustrated in the above section, let’s account for your purchase price this time, which is Rs.50.
So, you enter the value “5” in the annual dividend cell and the value “50” in the purchase price cell, and the calculator will calculate the dividend yield for you instantly. In this case, your dividend yield will be 10%.
| Dividend Amount | Purchase Price | Dividend Yield |
|---|---|---|
| 5 | 50 | 10% |
You could even calculate your dividend yield on a portfolio level by entering the total purchase price of all your equity investments and the total dividends received from all your investments that year.
Interpreting the Result From The Dividend Yield Calculator
The dividend calculator gives you the dividend yield instantly, but what is the purpose of the yield calculation? On the individual stock level, you can use the dividend calculator to compare the dividend yield you are generating from various investments. You can use this data to evaluate your investments and investing strategy.
That said, it is worth noting that the comparison is not an apples to apples comparison. This means that it will not be appropriate to compare the dividend yield of one company to any other companies. For example, you comparing high dividend yield PSU stocks with low to no dividend yielding growth stocks does not make sense. So, when you are comparing the dividend of different stocks, ensure that they are comparable.
Similarly, you can also use the dividend yield generated on a portfolio level to evaluate your investment portfolio. If you are targeting a specific dividend yield, you can make adjustments to your portfolio to achieve that target dividend yield.
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