Dividend Yield Explained

This video will teach you what dividend yield is, how to calculate it and why it's important. Dividend yield is the dividend, relative to the price of the investment.

Didn't hear me properly? This is what I was saying:

Today we're going to be learning what dividend yield is. We already know what a dividend is from the previous video, now we just need to know the yield part. If you don't know what a dividend is, just click on the word dividend to watch the previous video, and then come back to this video.
Let's use the hypothetical company from the last video, Soni's Shawarma. Soni's Shawarma is a restaurant chain that has thousands of restaurants across the country, and obviously, sells shawarmas.
Soni's Shawarma pays a quarterly dividend of $0.25. Which means in a year, it pays a total dividend of a dollar, since 25 cents every 3 months adds up to a dollar every year.
So we know how much Soni's Shawarma pays in dividends for every share that we own, but we don't know how much it costs to buy one share of Soni's Shawarma. What if I told you that one share of Soni's Shawarma costs $1000. Yes, $1000 to buy 1 share of Soni's Shawarma, and it only pays us one dollar in dividends every year. What if I told you that one share of Soni's Shawarma costs only $20. $20 for one share, and it pays us one dollar in dividends every year.
Which one would you rather pick? I would pick the $20 share that pays me $1, instead of the $1000 dollar share that pays me $1. Why, because it has a greater yield! Yield is simply the dividends we get, relative to the price of the share. That's not a dictionary definition, it's my definition for this case. So now let's calculate the yield of these two options, let's start with the $1000 share.
If one share of Soni's Shawarma costs $1000 and In one year, it gives us one dollar, the annual dividend is one dollar. So to calculate the yield, we need to take the dividend, and divide it by the price. So the dividend of one dollar, divided by the price of $1000, equals 0.001, which can also be expressed as 0.1%. So the dividend yield in this case is 0.1%. Now let's move on to the next case.
If one share of Soni's Shawarma costs $20 and in one year, it gives us one dollar, the annual dividend is one dollar. Just like before, to calculate the yield, we take the dividend and divide it by the price. So the dividend which is one dollar, divided by the price, which is $20, equals 0.05, which is another way of saying 5%.
So that's dividend yield, the dividend relative to the price. The $20 share has a yield of 5%, that means I'll be getting 5% of the money I paid every year. It means 5% of the price, will be paid to me in dividends. With the $1000 share which has a yield of 0.1%, it means I'll be getting 0.1% of the money I paid, every year. It means 0.1% of the price, will be paid to me in dividends.
So which one would you rather pick? Would you rather have your dividends equal 5% of the price you paid, or would you rather have them equal only 0.1% of the price you paid. I would rather have them equal 5% of the price I paid, because I get more money relative to the price I paid. If we're only looking at dividends, paying $20 to get an annual dividend of $1, is better than paying $1000 to get that same annual dividend of $1.
Remember, stock prices change every day, so that means, dividend yield will also change every day. If its $20 to buy a share that has an annual dividend of $1, it has a yield of 5%. If tomorrow, the price of that same share goes up to $21, then we divide 1 by 21 to get a yield of 4.76%. So as prices change, so does the yield, as dividends change, so does the yield.
So now you know what dividend yield is, how to calculate it, and why it's important. If you liked this video, please make sure to hit that subscribe button. Thank you.

[MakeamericaGreatagain-hj]

Don't forget that Charlie Munger and Warren Buffett invented the idea of investing and buying at both market highs and lows. As Warren Buffet noted, he has witnessed this occur frequently during his life. I'm not a trader. Never did my husband and I make more money than others in the middle class. With a $4 million stock portfolio, we intend to retire at age 58. Never have we ever sold even one share of stock...

[jeromek]

If only it was this easily explained in school..too bad college is non refundable

[dcffvgfcgf]

To anyone reading this comment, that has just finished watching this video, I tell you to be cautious and smart with your money. Yes you could find cheap stocks with high dividend yields but, cheaper stocks are normally riskier as they may not come from a well established company. The rewards are higher but you also risk losing it all. Opposed to making a safe investment in a bank. Not to say don't make risks, but make calculated risks. Don't just invest all your money in Sonis shawarma because it has a better dividend yield.

[Anababyyy]

Literally going to pass my Accounting class thanks to you. :')

[rumeysaata]

Got more out of this than from my textbook and lecture. Thank you

[briankraemer]

You should be a teacher, man. I really enjoyed how clearly and simply you expressed yourself without sounding condescending. You just sounded clear. I really appreciate this because too many people say things like, "Let me make this easy for you, " or "Let me say it in a way that anyone can understand, " or other such things. Thanks for your efforts and I hope you have more videos. :)

[GryphonFootball-uvml]

Wow!!! This is the best video I've seen explaining how the yield is affected by the share price. Price goes up, yield (%) goes down. I guess it's better/easier to look at the dollar amount of the dividend that each share will pay you.

[karyn]

After weeks of listening to yields.... you explained this perfect in a minute

[beatsbyarvin]

Currently studying CISI UK and was struggling to understand but this explanation is so simple and easy to understand 👏🏻👏🏻👏🏻👏🏻

[stacymadson-jensen]

20 YouTube videos later and I finally get it after this one 🙏 thank you so much

[frankp]

Wow straight to the point in five min I learned a week of school teaching....thanks

[BrianVelez]

How am I just finding your channel now! Thank you so much!

[farzadk]

The best and simplest way to explain, thank you!

[thesolarfutureenthusiast]

I was just looking to see if the yield changed or was fixed to the share price of a certain day of the year. This was covered along with a simple explanation. Thanks

[SoniBrosInvesting]

Dividend Yield Explained! Big Words in Simple Terms

[linni]

you've provided clarity to a subject that I've been trying to understand for a LONG time thank you!

[adolphlopez]

now I've got your instructions. and I'm going to have to see you and your instructions repeat, as over and and over again to really get your instructions more clearly.

[brendene]

As a jew, I can really appreciate the shawarma example. Automatic subscribe.

Side note: I really appreciate the explanations...so what you're saying is if you own stock in a reit and the prices change, your yield and return will reflect that market price, not the price you bought in for? That's something that I've been questioning for a while. Thanks so much for the videos.

[MA-oxjl]

God send ! I've been asking this question for ages and I finally have a good answer. Thank you

[hopolo]

so, the yield is just a ratio between stock price and annualized dividend amount. This info is useful when compared to other stock's dividend yields in determining which stock to buy.