Another Example

Company ABC Limited stock is trading at $$20$ and pays yearly dividends of $$1$ per share to its shareholders. Also Company XYZ Limited stock is trading at $$40$ and also pays annual dividends of $$1$ per share. This means that company ABC$$s dividend yield is $5\%(1/20=0\mathrm{.}05),$ while XYZ$$s dividend yield is only $2\mathrm{.}5\%(1/40=0\mathrm{.}025).$ Assuming all other factors are equivalent, then, an investor looking to use his or her portfolio to supplement his or her income would likely prefer ABC's stock over that of XYZ$,$ as it has double the dividend yield.