Dividend Yield is a key financial ratio that measures the annual dividend income an investor earns from a stock relative to its current market price. It helps investors evaluate how much cash flow they can expect from dividends for every rupee invested in a companyís shares. In simpler terms, it indicates the return an investor receives from dividends, independent of any capital gains or losses from price movement.

The Dividend Yield Formula is: Dividend Yield = (Annual Dividend per Share / Current Market Price per Share) ? 100

For example, if a company pays ?10 as an annual dividend and its current share price is ?500, the dividend yield would be 2%. This means the investor earns a 2% return annually through dividends, excluding any share price appreciation.

Importance of Dividend Yield:

• Income Indicator: It helps income-focused investors identify stocks that provide consistent cash returns.
• Valuation Tool: A higher yield may indicate undervaluation, while a very high yield might signal financial distress or unsustainable payouts.
• Investment Comparison: It allows comparison between dividend-paying stocks and other income-generating investments like bonds or fixed deposits.

Factors Affecting Dividend Yield: Stock price fluctuations, company dividend policy, and profitability directly influence the yield. When share prices rise, the yield tends to decrease (if the dividend remains constant), and vice versa.

While a high Dividend Yield may seem attractive, investors should also consider dividend sustainability, payout ratio, and the companyís long-term growth prospects. In summary, dividend yield is a vital metric for balancing income and growth objectives in a well-diversified equity portfolio.