How do I analyze a stock’s dividend yield?

To analyze a stock’s dividend yield, divide the annual dividend paid per share by the current market price per share. It tells you how much return you’re getting from dividends relative to the stock’s price. A higher yield may indicate regular income, but too high could be a red flag. Compare it within the same industry to get a fair idea of performance.

What is Dividend Yield and Why Does it Matter?

Dividend yield shows how much cash flow you get for every rupee invested in a stock. It’s expressed as a percentage. For example, a stock priced at ₹100 with a ₹5 annual dividend has a yield of 5%. It helps investors know how much passive income they might earn, especially useful for those seeking consistent returns over time.

How is Dividend Yield Calculated?

The formula is simple:

Dividend Yield = (Annual Dividend per Share ÷ Current Market Price) × 100

Example: If a company pays ₹8 per share annually and its current stock price is ₹200, the dividend yield is:
(8 ÷ 200) × 100 = 4%

     This means you're earning 4% on your investment through dividends.

What is a Good Dividend Yield?

A “good” dividend yield depends on the industry. Generally, a yield between 2% and 6% is considered decent. But higher yield doesn’t always mean better — sometimes high yields are because the stock price dropped due to poor business performance. Always check the company’s past dividend history and payout ratio to be safe.

Should I Only Invest in High Dividend Yield Stocks?

Not always. A high dividend yield might mean the company is not growing or is in financial trouble. Sometimes the stock price falls, making the yield appear high. Also, growth stocks usually pay less or no dividends but give higher capital appreciation. It’s best to balance between high yield and company stability.

Where Can I Find Dividend Yield Information?

You can find dividend yield data on financial platforms like Angel One, NSE India, BSE, Moneycontrol, and more. These sites show current dividend yield, past dividend history, and even upcoming dividend dates. This helps in comparing stocks and making informed investment choices.

How to Use Dividend Yield in Investment Strategy?

Dividend yield is ideal for creating a passive income stream. Long-term investors use it to build steady returns, especially in retirement portfolios. Mix it with growth stocks to balance income and capital appreciation. Also, reinvesting dividends can help boost total returns through compounding.