What is the purpose of calculating dividend yield?

Calculating dividend yield is specifically used to evaluate the performance of a stock investment by providing insight into the income generated from that investment relative to its market value. It is expressed as a percentage and indicates how much a company pays in dividends each year relative to its stock price. This measurement allows investors to compare the income potential of different investments, making it a critical aspect of assessing how well a stock is performing, particularly for income-focused investors.

Other options relate to different aspects of stock evaluation or investment analysis. Determining the market value of a stock typically involves looking at various factors, including price-to-earnings ratios or market capitalizations, rather than solely the dividend yield. Assessing the financial health of a company encompasses a broader array of metrics, including profitability, debt levels, and cash flow, which go beyond just the dividend yield. Estimating future growth of a stock is generally linked to anticipated earnings and market opportunities rather than the present dividend yield, as it focuses more on growth potential than current income.