Dividend Yield

What it is\nAnnual dividends per share / share price. A 4% dividend yield = $4 of annual income per $100 invested.\n\n## What "good" looks like\n- 5%+: high — usually signals either a deeply undervalued business OR a stretched payout ratio that may not be sustainable\n- 2–5%: typical for mature, capital-returning businesses\n- 0.5–2%: signals the business is reinvesting most of its cash flow\n- 0%: growth-mode (no dividend) — common for tech and early-stage companies\n\n## What matters more than the yield itself\n1. Dividend growth rate: a stock yielding 2% growing dividends 15%/year compounds faster than a stock yielding 5% with stagnant dividends\n2. Payout ratio: dividends / earnings. Above 80% is unsustainable; above 100% is a red flag\n3. History: 20+ years of uninterrupted dividend payments = strong capital-allocation discipline\n\n## Watch for "yield traps"\nA stock at 12% dividend yield is rarely a bargain. Usually the share price has collapsed because the market expects the dividend to be cut. Examples: GE in 2018, AT&T in 2022. Always check whether free cash flow covers the dividend before buying for yield.