2) Fundamental Analysis

What is Dividend Yield

You own a stock that regularly pays dividends, but how big is the dividend relative to the stock price? That's where dividend yield comes in. Think of it as the 'interest rate' on your stock investment, like bank deposit interest but potentially bigger.

Definition

Dividend yield is the percentage of dividend per share compared to the stock price. Formula: (Dividend per Share / Stock Price) x 100%. If BBRI stock costs Rp5,000 and pays Rp250 dividend, the yield is 5%. This means for every Rp100 you invest, you get Rp5 back as dividends.

Simple Explanation (Analogy)

Dividend yield is like rental property returns. You buy a boarding house for Rp1 billion and collect Rp60 million rent/year. Yield is 6%. Your friend buys one for Rp2 billion with the same Rp60 million rent. Yield is only 3%. Different prices, same rent, but very different returns. Dividend yield helps compare 'returns' across stocks.

Indonesian Stock Example

High dividend yield stocks in Indonesia usually come from banking and commodity sectors. BBRI and BMRI often offer 4-6% yields. Coal stocks like ADRO or ITMG can sometimes yield 10%+ when coal prices are high -- but remember, this may not be sustainable. BBCA's yield is usually lower (2-3%) because its stock price is premium.

How to Use

Compare stock dividend yield with bank deposit interest. If stock yield is 5% while deposits offer only 4%, stocks provide a higher return plus potential capital gains.
Check dividend payment consistency. A high yield is useless if the company only pays dividends once then stops. Look for at least 5 consecutive years of consistency.
Use dividend yield as one of your stock screening filters, especially if your goal is passive income. Set a minimum yield of 3-4% as a starting point.

Common Mistakes

Chasing the highest yield without checking sustainability. A 15% yield sounds amazing, but if it's because the stock price dropped 50% (not because dividends increased), it's a trap!
Forgetting that yield changes daily because stock prices change. The yield you see today may not be the same tomorrow. Yield is calculated from the last dividend divided by the current stock price.
Ignoring dividend tax. A 5% yield after 10% tax becomes an effective yield of 4.5%. This must be factored into your return calculations.

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FAQ

What's an ideal dividend yield?

In Indonesia, 4-6% yield is considered attractive. Above 6% needs a sustainability check. Below 2% is usually unappealing for income investors, though the company might be more growth-focused. Also compare with deposit interest rates as a benchmark.

Is it better to buy high-yield stocks or high-growth stocks?

Depends on your life stage and goals. If you're young and chasing wealth growth, growth stocks might suit you better. If you're near retirement and need passive income, high-yield stocks are more appropriate. Ideally, your portfolio has a mix of both.