What does the dividend yield signify for investors?

The dividend yield signifies the return on investment relative to share price, making it a crucial metric for investors interested in income-producing investments. It is calculated by dividing the annual dividends paid per share by the current share price, allowing investors to understand how much income they can expect to receive from their investment in relation to what they paid for the stock. This metric is particularly appealing for those seeking passive income through dividends, as it helps assess the effectiveness of their investments in generating cash flow.

Other options touch on relevant concepts but do not accurately define what dividend yield directly represents. For instance, total dividends a company is expected to pay provides a broader view of dividends without linking it to the share price, while the net income distributed to shareholders refers more broadly to overall profitability rather than the specific ratio that dividend yield represents. The expected growth of a company's stock involves capital appreciation, which is not related to the income-focused nature of dividend yield. Thus, the focus of dividend yield is specifically on the income return relative to the investment made.