CompanyGraph
Averages five years of yield to reveal the company's baseline cash-return pattern, stripping out single-year distortions from price spikes or dividend cuts.
5-year average dividend yield is the typical dividend yield the stock has offered over the past five years. It helps you see whether the current yield is high or low compared to history.
The 5-year average dividend yield represents the mean dividend yield over the past five years, smoothing out short-term fluctuations in both dividend payments and stock prices. This metric provides a normalized view of a stock's income characteristics, helping investors assess whether current yield is above or below the historical norm and identify potential value opportunities.
The calculation:
5-Year Average Yield = Average of annual dividend yields over the past 5 years
Why 5-year average yield matters:
- Valuation context: Determines if current yield is historically high or low
- Mean reversion signal: Yields often revert toward historical averages
- Entry point identification: Yield above average may indicate undervaluation
- Dividend policy insight: Reveals management's long-term commitment to dividends
Interpreting current yield vs. 5-year average:
- Current > Average: Stock may be undervalued OR market expects dividend cut
- Current < Average: Stock may be overvalued OR market expects dividend growth
- Current ≈ Average: Trading near historical norms
Example analysis:
Current yield: 4.5% 5-year average: 3.2% Interpretation: Yield 40% above average—investigate why
Reasons current yield might exceed average:
- Stock price decline: May be buying opportunity if fundamentals intact
- Recent dividend increase: Positive development not yet reflected in price
- Market pessimism: Sector or company-specific concerns depressing price
- Dividend risk: Market may expect a cut, inflating current yield
Important caveats:
- Business changes: Five-year history may not reflect current business model
- One-time events: Special dividends or unusual years can skew the average
- Interest rate shifts: Yield expectations change with the rate environment
- Sector evolution: Industry norms for yields may have shifted
Use the 5-year average as one input among many. A yield significantly above average deserves investigation—it may signal either opportunity or warning depending on the underlying circumstances.
Where it fits
5-Year Average Dividend Yield→DividendA dividend is a distribution of a company's earnings to shareholders, typically paid in cash on a regular schedule as a way to share profits with investors.