What is Dividend Yield?
Dividend yield is a financial ratio expressing the annual dividend per share as a percentage of the current share price, indicating the cash return an investor earns from dividends alone, excluding capital gains.
How It Works
- Formula: (annual dividend per share / current share price) × 100.
- Trailing yield uses the past 12 months of dividends.
- Forward yield uses the most recent announced or projected dividend.
- Higher yields can signal value, low growth prospects, or distress.
Saudi Context
On Tadawul, banks (SNB, Al Rajhi, Riyad), telcos (stc, Mobily, Zain KSA), and petrochemical leaders (SABIC) are the highest-yielding sectors, often distributing 3% to 6% annually. Saudi investors weigh dividend yield carefully because dividends are tax-free for resident individuals but subject to 5% ZATCA withholding for non-residents.
Example
A Tadawul-listed company trades at SAR 80 and pays an annual dividend of SAR 4 per share. Dividend yield = 4 / 80 × 100 = 5.0%.