What Is Dividend Yield
You choose a savings deposit by looking at its interest rate. The stock-market equivalent of that 'interest rate' is dividend yield. But there are things to be more careful about than with a deposit.
The dividend yield formula
Dividend yield shows what percentage of the current share price you receive as dividends over one year.
Dividend yield = annual dividend per share ÷ current share price × 100 (%)
For example, if a stock trades at ₩50,000 and pays ₩2,000 per share in dividends over a year, the dividend yield is 4%. Like deposit interest, it shows 'what percentage of the money I put in do I get back as cash each year?'
Because the share price changes daily, the dividend yield changes daily too. Even if the dividend stays the same, the yield rises when the share price falls and falls when the share price rises.
The trap of high dividend yield
A number like 'dividend yield of 8%!' is tempting. But a high dividend yield isn't always a good sign.
Because the denominator of dividend yield is the share price, a sharp price drop makes the yield jump even if the dividend stays the same. In other words, there are situations where a company is in crisis and its share price has been cut in half, but the dividend hasn't been cut yet, so 'only the yield looks high.' This is called a 'dividend trap.'
On top of that, if the company's situation worsens, it may cut or eliminate the dividend itself. Then the yield that looked high becomes a mirage.
So instead of just looking at the dividend yield, you should also check whether that dividend is 'sustainable.' It's important to build the habit of confirming whether the dividend is excessive relative to profit (payout ratio) and whether cash flow can support the dividend.
Looking at it on an 'after-tax' basis with taxes
The dividend you actually pocket is after taxes are taken out. In Korea, dividends from domestic stocks are typically subject to 15.4% withholding (14% dividend income tax + 1.4% local income tax).
So even a 'dividend yield of 4%' feels lower once taxes are deducted. Remember that the stated yield is mostly on a pre-tax basis.
Also, dividends come with an ex-dividend adjustment where the share price drops by the dividend amount the moment it's paid, so dividend yield isn't a free bonus stacked on top. It's important to understand that dividends give you cash flow but at the cost of that amount leaving the share price.
常见问题
Q. Is a stock with a high dividend yield a safe stock?
Not necessarily. An abnormally high dividend yield may mean the share price has fallen sharply, and behind that could be a company crisis. A stable dividend comes not from 'the height of the yield' but from 'a track record of steadily maintaining and increasing dividends' and from 'the profit and cash flow that can support the dividend.'
Q. Is this different from yield on cost (YoC)?
Yes, it's different. Dividend yield is based on the 'current share price,' while yield on cost (YoC) is based on 'the price I bought at.' As dividends grow while you hold long term, your YoC keeps rising, but this can be an illusion. The attractiveness of a new purchase should be judged strictly by the dividend yield based on the current share price.
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📋 结果基于历史数据计算,过去的收益不代表未来的收益。
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