Know what Dividend Yield is and how to calculate it

Generally, a novice investor, when buying a stock, expects that stock to appreciate over time so that, without knowing what a dividend is, he sells it at a profit or loss.

However, some more veteran investors like to receive dividends , which are part of the profit distributed among shareholders in the form of income, according to the decision of the company’s Board of Directors. However, what is Dividend Yield ?

Dividend Yield is an English term that, translated into Portuguese, means in general terms Dividend Yield. This can be considered an indicator of company bonuses, where the higher the DY, the greater the profit shared with the company’s shareholders. This briefly explains what Dividend Yield is .

Learn more about what Dividend Yield is

For investors who focus on the long term , as is the case with investors who attend meetings and are engaged with company guidelines, Dividend Yield is an indicator of paramount importance.

To arrive at the Dividend Yield value of a given asset, it is necessary to perform a calculation. This calculation is easier than you think.

  • Dividend Yield = [Dividends paid per share (in 12 months) / Share value] x 100

Note: This value is given as a percentage, so the multiplication by 100

See an example below:

  • Suppose you have Petrobras shares (PETR4) in your portfolio, and over the past 12 months, Petrobras has delivered to its shareholders in the form of dividends an amount of R $ 1.50 per share.
  • Suppose also that the share price on the calculation date is R $ 25.00
  • So we have:
    • DIvidend Yield = (1.50 / 25.00) x 100 = 6%

Therefore, for this hypothetical case, the value of Dividend Yield is 6% for a period of 12 months.

This percentage shows that Petrobras’ share delivered a return to its shareholder of 6% per year. With that, we have a good way to compare investment in variable income with fixed income, for example.

What is Dividend Yield in Real Estate Funds

In real estate funds, or SIEF, the term Dividend Yield is established in the same way.

Instead of dividends, in the FIIs the part of the profit that is granted to the shareholders is commonly called income.

Another particularity of real estate funds is the frequency in which these earnings are distributed.

While in shares, dividends are normally distributed quarterly, semi-annually or even annually, in FIIs this distribution is made monthly .

This is one of the positive points of the FIIs, where the investor can plan in a convenient way to use the income to pay bills or even to reinvest in the asset itself.

Considerations

An important point that the investor should be aware of is that if the asset has suffered an abrupt devaluation in the period, Dividend Yield may appear better than the reality.

This is because the price of the asset may be undervalued, resulting in an increase in the DY that varies inversely with the price of the asset.

Therefore, it is essential that you pay attention when analyzing this indicator, and be aware of the asset’s price history throughout the analysis period. We hope that this content has solved your doubts about what Dividend Yield is . Good investments!

 

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