Definition
A stock or fund's annual dividend divided by its price, expressed as a percentage. A $75 stock paying $3 a year yields 4%. Yield moves inversely with price: a falling price raises the yield even when nothing improved.
Why it matters
Yield is income, not a quality grade: an unusually high yield often signals a falling price or an unsustainable payout (a yield trap). Check the payout's history and the company's earnings before trusting a big number.
Example
A stock pays $3 a year and trades at $75, a 4% yield. Bad news drops the price to $60 and the yield jumps to 5%; nothing got better, and when the dividend is later cut to $1.80, the buyer's actual yield lands at 3%.
Put it into practice
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.