The calculation for dividend yield is defined as:

The calculation for dividend yield is defined as annual cash dividends per share divided by the market price per share. This ratio indicates how much a company pays out in dividends relative to its share price.

Focusing on annual cash dividends per share captures the actual cash returns that shareholders receive for each share they own, while the market price per share represents the current valuation of the stock. As such, the dividend yield provides investors with a measure of the income generated by their investment in relation to its market value, allowing for better assessment and comparison of investment opportunities.

This metric is particularly useful for investors seeking income from their investments, as it quantifies the return on investment from dividends alone. When market prices fluctuate, the dividend yield will also change, which can influence investor perceptions of a stock's desirability.

Understanding this relationship is key when evaluating investment strategies, especially for those focused on dividend-paying stocks.