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Definition: Dow Jones Industrial Average (DJIA) Yield
DJIA is the aggregate dividend yield on the 30 stocks which makes up the Dow Jones Industrial Average. For calculating the DJIA yield first the Dividends of all 30 component stocks are added, dividing the result by the price-weighted DJIA index value and then factoring in the Dow multiplier.
The DJIA yield is mostly used as a trading indicator by most investors. The yields less than 3% are considered a selling signal whereas yields over 6% are considered as a buying signal. DJIA yield’s trading indicator function has not benefited much in the most recent bull market period, as the DJIA Yield has stayed less than 3% from the early 1990s.
The consistent downtrend in DJIA yields tends to reflect the changes in company mix.
The DJIA is now no more a purely industrial index; today DJIA yield contain technology companies, healthcare, and financial companies that traditionally pays lower dividend rates than other mature, industrial-based stocks.