What is dividend yield?

Dividend yield tels us how much money we will receive for each dollar invested. Dividend yield is Annual dividend per share divided by Current Share Price. For example, if the Annual dividend per share is $2 and the Current Share Price is $20, then Dividend yield is 2/20 or 10%.

High Dividend yield could means that the Annual dividend is high or that Current share price is low. We can conclude that high Dividend yield could mean that the share is undervalued. So having other parameters equal one should buy stocks with higher Dividend yield.