The calculation of dividend yield uses the market price of the stock. Thus, in our example, dividend yield was 2.5%. Now, since you are a long term investor, you buy a stock and hold it for a long term. During this time, the stock may undergo stock splits and bonuses. Also, the price of the stock goes up over time. This means that although the prevailing price of the share is high, your cost of acquisition of the stock could be fairly lower compared to the market price.