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Dividend Yield

Dividend yield is the dividend per share of a company divided by the market price per share. For example, a company paid a dividend per share of N1 and has a current market price of N50 per share. Dividing the dividend per share of N1 by the market price per share of N50 gives you a dividend yield of two percent (2%). As such, if you have determined dividends as your major source of investment for the stock you would only be getting a return of two percent (2%) per annum. Comparing that to other investments options such as treasury bills and bonds which pay about ten percent (10%) to fourteen (14%) respectively in yields suggest you are not getting good value. Therefore, for the company to match the ten percent (10%) treasury bills are paying it will have to pay dividend of N5 which is 5x its current dividend per share. Stocks quoted on the Nigerian stock exchange typically pay an average dividend yield of 5%


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