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

Here is the response from ChatGPT for the prompt what makes dividend yield go up entered on March 21, 2023.

The dividend yield of a company is calculated by dividing the annual dividend per share by the current market price per share. Therefore, there are two primary factors that can cause the dividend yield to go up:

1. Increase in dividend payout: If a company decides to increase its dividend payout, the annual dividend per share will increase, which will result in a higher dividend yield. This may happen when a company has a strong financial position and wants to reward its shareholders by distributing more of its profits in the form of dividends.

2. Decrease in stock price: If the market price per share of a company's stock decreases, while the dividend per share remains the same, the dividend yield will increase. This means that investors who buy the stock at a lower price will receive a higher yield on their investment. This may happen when there is negative news about the company or the market in general, which causes investors to sell their shares and drives down the stock price.

It's important to note that the dividend yield is just one factor to consider when evaluating the potential return on an investment. A high dividend yield may not always indicate a good investment opportunity, as it could be a result of a declining stock price or an unsustainable dividend payout. Therefore, investors should also consider other fundamental factors such as the company's financial health, growth prospects, and valuation before making an investment decision.