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Dividend Yield
June 07 , 2012

The term 'yield' always means annual return on your investment. Dividend yield means the annual return that you get purely from dividends declared in the shares you hold. Say you hold shares worth Rs 1000 and you derive an income of Rs 40 in the year from dividends declared in some or all of these shares. This is said to be a 4% dividend yield.

The average market dividend yield in India is about 2%, but there can be significant variation between sectors. Oil marketing companies and fertilizer companies for instance are known to give huge dividends. However, you should note that dividend yield is not the only component of your returns - there is also the factor of share price appreciation. While looking at overall returns, you should see both these together.

That said, high dividend yielding companies are sometimes used by pensioners who park part of their portfolio here to get regular returns.

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