what is a forward dividend yield 
a forward dividend yield is an estimation of a year s dividend expressed as a percentage of the current stock price the year s projected dividend is measured by taking a stock s most recent actual dividend payment and annualizing it the forward dividend yield is calculated by dividing a year s worth of future dividend payments by a stock s current share price understanding a forward dividend yieldfor example if a company pays a q1 dividend of 25 cents and you assume the company s dividend will be consistent the firm will be expected to pay 1 00 in dividends over the course of the year 25 cents x 4 quarters if the stock price is 10 the forward dividend yield is 10 1 10 x 100 the opposite of a forward dividend yield is a trailing dividend yield which shows a company s actual dividend payments relative to its share price over the previous 12 months when future dividend payments are not predictable the trailing dividend yield can be one way to measure value when future dividend payments are predictable or have been announced the forward dividend yield is a more accurate tool forward dividend yield is also know as indicated yield an additional form of dividend yield is the indicated yield or the dividend yield that one share of stock would return based on its current indicated dividend to calculate indicated yield multiply the most recent dividend issued by the number of annual dividend payments the indicated dividend divide the product by the most current share price indicated yield mrd of dpey stock pricewhere mrd most recent dividenddpey dividend payments each year begin aligned text indicated yield frac text mrd times text of dpey text stock price textbf where text mrd text most recent dividend text dpey text dividend payments each year end aligned indicated yield stock price mrd of dpey where mrd most recent dividenddpey dividend payments each year for example if a stock trading at 100 has a most recent quarterly dividend of 0 50 the indicated yield would be indicated yield of stock abc 0 50 4 100 2 text indicated yield of stock abc frac 0 50 times4 100 2 indicated yield of stock abc 100 0 50 4 2 forward dividend yields and corporate dividend policya company s board of directors determines the dividend policy of the company in general more mature and established companies issue dividends while younger rapidly growing firms often choose to put any excess profits back into the company for research development and expansion purposes common types of dividend policies include the stable dividend policy in which the company issues dividends when earnings are up or down the goal of a stable dividend policy is to align with the firm s goal for long term growth instead of its quarterly earnings volatility with a constant dividend policy a company issues a dividend each year based on a percentage of the company s earnings with constant dividends investors experience the full volatility of company earnings finally with a residual dividend policy a company pays out any earnings after it pays for its own capital expenditures and working capital needs 