Dividend Yield is a financial ratio that indicates how much a company returns to its shareholders in the form of dividends, relative to its current stock price.
It is especially valuable for income-focused investors looking for regular returns from their equity investments.
Dividend Yield=(Annual Dividend Per Share/Current Market Price Per Share)×100
Understanding Dividend Yield in the Indian Stock Market
In India, companies listed on the NSE (National Stock Exchange) and BSE (Bombay Stock Exchange) distribute dividends periodically.
These can be declared quarterly, semi-annually, or annually.
Dividend yield serves as an indicator of how much "return" an investor can expect purely from dividends, excluding any capital appreciation.
High Dividend Yield may suggest an attractive income opportunity, but could also reflect a falling stock price or low growth prospects.
Low Dividend Yield might indicate a growth-oriented company that reinvests profits rather than distributing them.
Types of Dividends in India:
- Interim Dividend – Paid before the fiscal year ends, based on quarterly performance.
- Final Dividend – Declared after year-end results, subject to shareholder approval.
- Special Dividend – A one-time payout due to exceptional profits or asset sales.
Example:
If a stock is priced at ₹500 and the company declares an annual dividend of ₹25 per share:
Dividend Yield=(25/500)×100=5%
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