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Dividend yield or the dividend-price ratio is the company's annual gross dividend paid divided by its market cap, or the dividend per share divided by the price per share. The dividend yield represents the percentage that the stock returns as compared to its current price.

The dividend yield is one of the many measures investors use to evaluate whether to invest in a particular company.

Dividend Yield Calculation is:

Dividend Yield = Annual Dividend per Share / Stock's Price per Share

One of the problems with the dividend yield is that the denominator of the formula includes the market price per share of the stock. The price many times is subject to general market fluctuations which in turn makes the dividend yield a subjective calculation. Additionally, the ratio is a moving target. Each day the ratio changes because the stock price changes.
When you pick a stock, pay attention not only to its dividend yield, but also to its other fundamentals. The dividend payout ratio is a good companion analytic along side the dividend yield. A high payout ratio and a high yield may indicate a company that may be in for financial trouble. The dividend yield is the reciprocal is the Price/Dividend ratio.