InvestmentFinancial Glossary
Dividend Yield
Definition
The annual dividend paid by a stock divided by its current market price, expressed as a percentage. A stock trading at Rs 200 that pays Rs 10 in annual dividends has a dividend yield of 5%. Dividend yield changes as the stock price moves — higher prices reduce yield and vice versa.
Why It Matters
High-dividend-yield stocks can provide regular income, but dividends are now taxable in the hands of the investor at their slab rate (since the 2020 budget abolished DDT). A 5% dividend yield in the 30% tax bracket becomes an after-tax yield of just 3.5%. Compare this with growth stocks that reinvest profits for capital appreciation, which is taxed at a lower LTCG rate.