<p>Dividend rate, a key metric in fundamental analysis, refers to the annual dividend payment expressed as a percentage of a company's stock price. It indicates how much a company pays out in dividends each year relative to its stock price.</p>

<h2>How It Works</h2>
<p>The dividend rate is calculated using the following formula:</p>
<ul>
  <li><strong>Dividend Rate</strong> = (Annual Dividends per Share / Stock Price) x 100</li>
</ul>
<p>For example, if a company pays an annual dividend of $2 per share and its stock price is $40, the dividend rate would be (2/40) x 100 = 5%.</p>

<h2>Why It Matters</h2>
<p>Dividend rate is crucial for investors as it helps evaluate the income generated from a stock. A higher dividend rate suggests a more attractive income stream, but it's essential to consider other factors like the company's financial health and growth prospects. For instance, a high dividend rate combined with consistent earnings growth indicates a stable and profitable company.</p>