Yield.

In plain English

Yield is the annual income from an investment divided by its current price, expressed as a percent. A $100 stock paying $3 in dividends has a 3% dividend yield. A bond paying $40 a year on a $1,000 face value has a 4% yield. Yield differs from total return, which also counts price appreciation or depreciation. The key arithmetic fact: yield rises when price falls and falls when price rises, because the same income divided by a smaller (or larger) number changes the percent.

01Why it matters

A high yield can mean a steady income source, or it can be a warning sign that the price has collapsed and the market doubts the income will continue. When you see a stock with a 12% dividend yield, the question is 'why?' not 'sign me up.'

02The math, step by step

In 2024, several U.S. bank stocks showed dividend yields of 8% to 10% while the S&P 500 averaged about 1.4%. The reason was not generosity: bank stock prices had fallen sharply on concerns about commercial real estate exposure, pushing reported yields up. Some of those high yields stayed; others got cut within a year.

Illustrative example. The amounts here are hypothetical, chosen to show how the math works, not real quoted rates or figures.

03What this is NOT