Difference Between Dividend and Dividend Yield (With Table)

In terms of money, when a company earns profit, this profit is distributed to their shareholders of the company, who invested money in their company in the first place. These profits are distributed as dividends. There are also various types and features in a dividend, and one of them is the dividend yield.

Dividend vs Dividend Yield

The difference between dividend and dividend yield is that the dividend is calculated by the average of the total payments let out by the company to its shareholders or investors, and, on the other hand, the dividend yield is calculated by dividing the annual share return of a company to its price.

A dividend is a profit that a company earns, which is distributed among the shareholders or investors of that company. The dividend is calculated as the annual incomes subtracted from the net earrings. This is, in short, the reward that a company provides in various forms to its shareholders. The declaration of the date or a percentage of a dividend is made by the board of directors of the company.

The dividend yield is the measure of cash flow in the form of dividends that are paid to their shareholders by a company according to their share as per the market value. This is measured by dividing the dividend per share in the market and multiplying the respective result by a hundred. A company producing a high dividend yield will tend to possess a high profit.

Comparison Table Between Dividend and Dividend Yield

Parâmetros de comparaçãoDividendoDividend Yield
SignificadoThis is said to be the total of the combined payment of the dividend that is expected.This is stated as the ratio of the annual profit of a company to its net earnings.
FórmulaDividend=Annual net income – the change in net earnings Dividend Yield = dividend / price
FunçãoThis means the total number of profits that a company distributes to its shareholders.This means the ratio of profit paid to shareholders based on the current market price of shares of a company.
Main advantageThis increases the returns of a company instead of slowing them down.It gives a clear view of a company’s intrinsic value.
ConceitoIt is a wider concept.It is a narrow concept.

What is Dividend?

A dividend is a profit that a company earns, which is distributed among the shareholders or investors of that company. The dividend is calculated as the annual incomes subtracted from the net earrings. This is, in short, the reward that a company provides in various forms to its shareholders. The declaration of the date or a percentage of a dividend is made by the board of directors of the company.

There is a need for approval by the shareholders of a company to distribute the dividend. A company does not need to pay a dividend. Similarly, a company that initially pays dividends to its shareholders needs not necessarily pay dividends to them when the company is in shortage of cash flow.

The process works in a manner that when a company announces dividend rate as per from one date to another, then all the members who register for shares paid till that date will be eligible for getting paid their dividend. The process of giving money is usually mailed to shareholders within a week or two of the announcement of the distribution of dividends. Sometimes it gets transferred to the bank account directly.

O que é rendimento de dividendos?

The dividend yield is the measure of cash flow in the form of dividends that are paid to their shareholders by a company according to their share as per the market value. This is measured by dividing the dividend per share in the market and multiplying the respective result by a hundred. A company producing a high dividend yield will tend to possess a high profit.

The date of dividend yield in a company is always measured by computing the average of an entity or an industry to which the respective company belongs. The companies distributed the dividends to their shareholders into a small portion of their profits, and the remaining that is retained is used for investing it back in the business.

A dividend yield is measured as the ratio of the earnings of a company to its price. The dividend yield is also sometimes called a dividend percentage. A company with a high dividend yield stock on a long-term basis is always said to be a good investment option for a person. Companies that produce high profits relatively often do not keep back any profits for retaining and reinvestment.

Main Differences Between Dividend and Dividend Yield

  1. The dividend of the company is stated as the total of the combined payment of the dividend that is expected, and on the other hand, the dividend yield is stated as the ratio of the annual profit of a company to its net earnings.
  2. The formula for the dividend is annual net income – the change in net earnings, and on the other hand, the formula for dividend yield is the dividend/price.
  3. A dividend means the total number of profits distributed by a company in small portions to its shareholders, and, on the other hand, a dividend yield means the ratio of profit that is paid to shareholders based on dividend as per current market price.
  4. The main advantage of giving out a dividend is it will increase the returns of a company instead of slowing them down, and on the other hand, the main advantage of giving out a dividend yield is that they give a clear view of a company’s intrinsic value.
  5. The board of directors decides on the payment of dividends in a company, and on the other hand, the shareholders decide the payment of dividend yields in a company.

Conclusão

Both the dividend and the dividend yields are related to some amount payable by a company to its shareholders in small amounts when a company attains profits. Both these are not always compulsory to be paid out by a company. When a company goes through a loss or is in shortage of cash, a dividend can be skipped to be distributed to its shareholders.

Even though a dividend and a dividend Yield are of the same profits, they do have their differences in their features and characters they possess and in which context they are provided to the shareholders. They also have a different formula when they have to be calculated.

Referências

  1. https://www.sciencedirect.com/science/article/pii/0304405X90900496
  2. https://www.sciencedirect.com/science/article/pii/0304405X74900063