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Importance of dividend yield when evaluating a stock?
The dividend yield can be used to compare a stock to other forms of investments that generate income to the investor - such as bonds.  I could purchase a stock that pays out a certain dividend yield or purchase a bond that pays out a certain interest.  Of course, there are many other variables to consider in addition to yield when making this type of investment decision. The dividend yield can be an important consideration if you are looking to invest in stocks for an income stream in addition to investing in stocks for gain by a rising stock price. The reason to use Dividend/market price is that it changes the dividend from a flat number such as $1 to a percentage of the stock price, which thus allows it to be more directly compared with bonds and such which return a percentage yeild.