Dividend yield tells you how much income a stock pays relative to its price. Formula: Dividend Yield = Annual Dividends Per Share ÷ Stock Price × 100. If a stock trades at $100 and pays $4 in annual dividends, its yield is 4%. It is like the "interest rate" on your stock investment.
High-yield stocks (4-8%): utilities, REITs, telecoms, and mature companies that generate steady cash flow. Low-yield or zero-yield stocks: fast-growing tech companies (Amazon, Tesla) that reinvest all profits into growth. The S&P 500 average yield is around 1.5%. India's Nifty 50 averages around 1.2-1.5%.
The Dividend Aristocrats — S&P 500 companies that have raised dividends for 25+ consecutive years — include Coca-Cola, Johnson & Johnson, and Procter & Gamble. Dividend investing provides income stability plus inflation protection (as companies raise dividends over time). Historically, dividends have contributed about 40% of total stock market returns — often overlooked by growth-focused investors.