A dividend is a share of profits and retained earnings a company usually pays out annually to its shareholders after it has used a portion to reinvest in the business.
A dividend is often regarded as a measurement of a company’s health and good management. Mostly profitable or cash-rich firms pay out dividends and some investors rely on these annual returns for investment income.
The dividend yield is a financial ratio that represents the cost of dividends each year relative to the company’s stock price. It usually gets expressed as a percentage and it’s calculated by dividing the dividend per share by the price per share.
A company's total annual dividend payments are divided by its market capitalization if the number of shares remains constant.