Income
Why a higher dividend yield is not always good news
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Dividend yield: the definition
Annual dividends per share divided by the current share price, expressed as a percentage.
What it means
A yield can rise because the dividend increases or because the share price falls. Check whether the figure uses past payments or a forecast. Neither guarantees the next payment.
ILLUSTRATIVE EXAMPLE
Imagine an annual dividend of 10p per share. At a 200p share price, the yield is 5%. If the price falls to 100p and the dividend figure stays at 10p, the yield becomes 10%. The cash dividend has not increased.
TRY YOUR OWN NUMBERS
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Use pence for both inputs. Enter the total dividend for a full year, using either past payments or a forecast consistently.
Dividends can change or be cancelled. This calculation excludes tax, charges, currency movements and changes in share value.
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What to check
- Is the dividend figure historical or forecast?
- Has the company announced a change to its dividend?
- What do cash generation and borrowing commitments suggest about its ability to keep paying?
A bigger percentage does not necessarily mean a better income prospect.
Sources and review date
Reviewed by Edravo on 6 September 2026.
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