Dividend is amount paid by company to shareholder usually distribution of profit. Dividend amount is often measured in terms of dividend yield or as dividend per share.
What is Dividend Yield?
Dividend Yield is financial ratio that indicates how much shareholders are paid in the form of dividend every year. it is calculated by dividing amount of dividend by the share price.
Let’s take simple example one price of one auto share is 200 Rs/- and Dividend per share is 10 Rs/- dividend yield under this case will be 5%. (10/200 x 100). If price of one IT share is 400 Rs/- and Dividend per share is 10 Rs/- dividend yield under this case will be 2.5% (10/400×100).
So in above example it is good to invest in auto share as it provide higher dividend yield compare to IT share as it gives more earning per rupee invested.
Company with higher dividend yield is good for investment because –
- Higher Dividend is sign of stable and profitable company as mostly profitable companies preferred to pay good dividend.
- This company provides steady cash flows.
- Price of high dividend yield fluctuate less with market fluctuations
Before Buying High Dividend yield stocks
Before buying a such stocks you need to take care of following:-
- Some companies may boost yield in order to attract investor. Even company is not making profit they attempt to lure investor by high dividend. One should check balance sheet before purchasing such stock.
- Don’t go for any startup company as startup may be paying dividend higher at initial years to attract customer.
- Rather than looking at highest dividend yield you need to check that it is sustainable or not. At least check out last five year dividend history.
Select company with justifiable dividend track record. A company that pays a steady dividend, especially if the company raises its dividend regularly over time is good buying bet.
Now as we know that high dividend yield stock is best for investment question arise which are these stocks? So I am herewith list of sensex stocks with highest dividend yield.