What does a stock's dividend yield tell me and can a high yield be a warning sign?

Dividend yield is the annual dividend divided by the current share price, expressed as a percentage, so a stock paying $2 a year at a $50 price yields 4%. It tells you how much income you'd earn relative to price, but it can be deceptive. Because price is in the denominator, a yield can spike simply because the share price crashed on bad news, not because the company got more generous. An unusually high yield sometimes signals a struggling company whose dividend may soon be cut. Focus on whether the payout is sustainable, looking at the payout ratio and the business's health, rather than reaching for the biggest number. For most investors, a diversified fund's modest yield plus price growth beats hunting individual high-yield stocks.