The AI (ChatGPT) Stock Dividend Handbook: What Makes Dividend Yield Go Down?

Here is the response from ChatGPT for the prompt what makes dividend yield go down decrease dividend payout increase stock price entered on March 21, 2023.

A company's dividend yield is the ratio of its annual dividend payment per share to its stock price per share, expressed as a percentage. The dividend yield can go down if the company decides to decrease its dividend payout or if the stock price goes up.

If a company decides to decrease its dividend payout per share, the dividend yield will go down assuming the stock price remains constant. For example, if a company paid an annual dividend of $2 per share and its stock price was $40 per share, its dividend yield would be 5% (2/40). If the company then decides to decrease its dividend payout to $1.50 per share, and the stock price remains at $40 per share, the dividend yield would decrease to 3.75% (1.5/40).

On the other hand, if the stock price goes up, the dividend yield will go down assuming the dividend payout remains constant. For example, if a company paid an annual dividend of $2 per share and its stock price was $40 per share, its dividend yield would be 5%. If the stock price then goes up to $50 per share, and the dividend payout remains at $2 per share, the dividend yield would decrease to 4% (2/50).

Investors should keep an eye on both the dividend payout and the stock price when analyzing a company's dividend yield. A decrease in dividend payout may indicate that the company is facing challenges or needs to prioritize other areas of its business. An increase in stock price, on the other hand, may reflect positive developments in the company's operations or market sentiment. However, it is important to note that a high stock price does not necessarily indicate a good investment, and investors should consider other factors such as the company's financial health, growth prospects, and valuation before making investment decisions.