When people invest in shares in a company or in other forms of stock, they are investing in the stock market. Investments pay yearly or twice yearly dividends depending on how the investment is doing.
A dividend yield is a term used on the stock market and refers to the ratio or percentage of the actual value of and relative to the stocks or shares prices, that a company pays out each year in dividends.
If there are no capital gains the dividend yield is a return on the investment If, for example your stock is trading at £20 and you receive a £1 dividend, then that is a yield of five percent.
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