Dividend Yield (DY)

Dividend Yield: passive income from stocks

Dividend Yield (DY) tells you how much cash a stock pays out each year compared with what you pay for the share: DY = dividends_paid_12m / share_price · 100%. Take a share trading at R$ 50 that handed out R$ 5 over the past 12 months. That works out to a DY of 10%. Looking at the Brazilian market in 2024, you'd see something like Itaúsa (ITSA4) around 5%, Petrobras (PETR4) near 13% before its distribution cut, and Vale (VALE3) roughly 7%. Real estate funds (FIIs) have to pay out at least 95% of their net result by law, and they usually land in the 7–10% range per year, tax-free for individuals. Right now dividends paid to individuals are income-tax exempt in Brazil, though the proposed tax reform could change that. Over in the US, the Dividend Aristocrats are the companies that have raised their dividend for 25+ consecutive years, names like Coca-Cola, Procter & Gamble, Johnson & Johnson.

Applications and context

It's a go-to number for passive-income investors and FIRE strategies, and it shows up constantly in retirement planning and real estate fund (FII) analysis. It helps you screen for companies that throw off cash, but watch out when a DY looks too generous. A very high one often points to a share price that's dropping or a payout the company can't keep up.

FAQ

Is a higher DY always better? No. Once you see a DY above 15%, take it as a red flag. Usually it means the stock price collapsed, or the company is paying out more than it can keep up. Check the payout ratio and the dividend history before you buy.

DY vs Dividend on Cost (yield on cost)? DY is figured against today's price, while yield on cost goes back to what you originally paid. If you've held for years, your yield on cost can sit well above the current DY.

Do FIIs pay tax on dividends? No. As long as the FII meets the legal requirements (listed, 50+ shareholders, and so on), its distributions reach individuals tax-free.