<P> The dividend yield or dividend - price ratio of a share is the dividend per share, divided by the price per share . It is also a company's total annual dividend payments divided by its market capitalization, assuming the number of shares is constant . It is often expressed as a percentage . </P> <P> Dividend yield is used to calculate the earning on investment (shares) considering only the returns in the form of total dividends declared by the company during the year . </P> <P> Its reciprocal is the Price / Dividend ratio . </P> <P> Dividend payments on preferred stocks ("preference shares" in the UK) are set out in the prospectus . The name of the preferred share will typically include its nominal yield: for example, a 6% preferred share . However, the dividend may under some circumstances be passed or reduced . The current yield is the ratio of the annual dividend to the current market price, which will vary . </P>

The formula for computing the dividend yield is