A dividend yield is how much a company pays out in dividends annually divided by its stock price. For example, if a stock trades at $40 and a company's annual dividend is $2, the dividend yield is 5%.
Generally, a high yield (between 2% and 6% is considered good) is preferable to a lower one. While higher-yielding dividend stocks provide more income, they usually come with greater risk. In contrast, lower-yielding dividend stocks deliver less income but are normally offered by more stable companies with a continuous record of consistent growth and steady payments.