Yield

The exam’s favorite trap is trailing vs. leading (forward) dividend yield: trailing uses the most recent year’s (trailing-twelve-month) dividends, leading uses next year’s forecasted dividends, each over the current price. A vignette that hands you both “expected” dividends and last year’s dividend is testing whether you pick the forward number for a leading yield. Watch the price too — yield always uses the current market price, not the price when the dividend was declared, so a stale price quietly distorts the answer.

Do not confuse it with earnings yield (E/P), the reciprocal of P/E and the equity leg of the Fed model; dividend yield counts only cash actually paid out, so a low payout ratio makes the two diverge sharply (most earnings retained). And keep yield distinct from total return — yield is just the income leg; price appreciation is the other, and ignoring it understates return for low-yield growth names. Hook: yield is the slice paid out; total return is the whole pie.