Annual dividends per share divided by the share price. A 4% yield pays $4 a year for every $100 invested, before franking credits.
The dividend yield is a share's income return. Australian companies pay out a larger share of profits as dividends than US companies, so ASX yields are typically higher.
Grossed-up yield adds the value of franking credits, which is what an Australian resident investor effectively receives.
Why it matters
A very high yield can signal that the market expects the dividend to be cut. Yields on shares compete with yields on bonds and term deposits, so dividend-paying shares are sensitive to interest rates.
