What does it mean?
Dividend yield of a stock signifies how much a company pays dividend in relation to its stock price. It is calculated as a fraction of annual dividends paid by the company upon its stock price. It implies how much return in dividend in a year an investor would get for every 100 invested in the stock price. Thus, higher yield means more returns for the shareholder.
High dividend yield is not always good…
Since dividend yield involves the company's stock price, it could become exceptionally higher due to a sharp fall in the stock price. Investors have to then be cautious while selecting companies based on high dividend yields. In such cases, it is advisable to look at the company's financial performance to gauge the likelihood of the company maintaining its past performance on dividend-payments.