EXPECTED DIVIDEND YIELD (EDY)

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Basically there is a difference between expected or forward dividend yield and trailing dividend yield because when one invests in stocks,the past does not necessarily equal the future. Expected dividend yield measures next year's expected dividends as a percentage of a stock's current price, using the last year dividend payout whereas the trailing yield uses the present year dividend as there is no guesswork about trailing yield for the dividend is already out so one can know the yield. The expected or forward yield shows the annual percent return one can expect to earn from dividends if the company keeps up its payouts.

 To calculate expected dividend yield we use the formula: 
EDY = forward annual dividend rate/stock's price * 100


 For example, let us assume stock Y has a current price of #650.00 and a forward annual dividend rate of #24.00. Applying these values into the formula we have:
EDY = 24/650 *100 = 3.7%
Meaning, if one buys this stock now, one would earn a 3.7% return over the next year from dividends excluding any potential stock price changes.

 Investdata Academy

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