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Yield vs Dividend yield: What's the Difference?

When it comes to investing, the terms "yield" and "dividend yield" are often used interchangeably. However, there is a big difference between the two. Here's a look at the key differences between yield and dividend yield.

What is Yield?

Yield is a measure of an investment's current return. It's calculated by taking the annual income from an investment (dividends, interest payments, etc.) and dividing it by the investment's current price. For example, if a stock is currently trading for $50 per share and pays $2 per share in annual dividends, its yield would be 4%.

What is Dividend Yield?

Dividend yield is a measure of a stock's current dividend payout. It's calculated by taking the stock's annual dividend payments and dividing it by the stock's current price. For example, if a stock is currently trading for $50 per share and pays $2 per share in annual dividends, its dividend yield would be 4%.

The Difference Between Yield and Dividend Yield

The key difference between yield and dividend yield is that yield measures an investment's current return, while dividend yield measures a stock's current dividend payout. In other words, yield is a measure of an investment's total return, while dividend yield is a measure of just the portion of an investment's return that comes from dividends.

Why is Dividend Yield Important?

Dividend yield is important because it can give you a good idea of how much income you can expect to receive from a stock. For example, if you're looking for a stock that will provide you with a steady stream of income, you'll want to focus on stocks with high dividend yields. On the other hand, if you're looking for a stock that will provide you with the potential for capital gains, you'll want to focus on stocks with low dividend yields.

Why is Yield Important?

Yield is important because it can give you a good idea of how much return you can expect from an investment. For example, if you're looking for an investment that will provide you with a steady stream of income, you'll want to focus on investments with high yields. On the other hand, if you're looking for an investment that will provide you with the potential for capital gains, you'll want to focus on investments with low yields.

Final Thoughts

The key difference between yield and dividend yield is that yield measures an investment's current return, while dividend yield measures a stock's current dividend payout. In other words, yield is a measure of an investment's total return, while dividend yield is a measure of just the portion of an investment's return that comes from dividends.

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