Dividend Yield is a financial ratio that shows how much dividend income an investor earns from a stock each year as a percentage of its current market price.
Dividend Yield is an important metric for investors who focus on regular income from stocks, especially long-term and conservative investors. It helps measure the cash return generated by a company in the form of dividends relative to its share price.
A higher dividend yield indicates higher income, but it does not always mean a better investment. Sometimes, dividend yield rises because the stock price has fallen, which may signal financial trouble. Therefore, investors should always analyze dividend yield along with the company’s profitability, dividend history, payout ratio, and financial stability.
Dividend yield is commonly used to compare income-generating stocks, mutual funds, and ETFs. It is especially popular among retirees and income-focused investors who prefer steady cash flow over capital appreciation.
"If a company pays an annual dividend of ₹20 per share and its current market price is ₹400, the dividend yield will be: Dividend Yield = (20 ÷ 400) × 100 = 5% This means the investor earns a 5% return per year as dividend income."