What is the Dividend Yield?
Dividend yield is the annual dividend as a percentage of the share price. It tells you the cash return a stock pays independent of price movement — the "rent" on your capital.
The more revealing figure for a long-term holder is yield on cost: dividend divided by the price you paid. A stock bought years ago at ₹280 now paying ₹18 yields 6.4% on your cost, even though a new buyer at ₹450 only gets 4%.
Formula & worked example
Two yields, same dividend:
Yield on cost = (Annual dividend per share / Your buy price) × 100
Worked example: 500 shares paying ₹18 each = ₹9,000 a year. At ₹450 the current yield is 4.0%; on your ₹280 cost it is 6.43%. At a 30% slab you keep ₹6,300 after tax.
How to use this dividend yield calculator
- Enter your share count and the annual dividend per share (sum all payouts in a year).
- Add the current price and your average buy price.
- Set your income tax slab — dividends are taxed at slab rate in India since 2020.
- The table projects income if the company grows its dividend 8% a year.
Smart tips
- A very high yield often signals a falling price or an unsustainable payout rather than a bargain.
- Dividend growth matters more than starting yield over long periods. A 3% yield growing 10% a year beats a static 6% within a decade.
- Dividends are taxed at your slab rate, and TDS of 10% applies above ₹5,000 per company per year.
- Check the payout ratio — above 80% of earnings leaves little room to sustain the dividend in a bad year.
Frequently asked questions
What is a good dividend yield?
In India, 2–4% is typical for quality large caps and 5%+ is high. Unusually high yields often reflect a price collapse rather than generosity.
How are dividends taxed in India?
Since April 2020 dividends are added to your income and taxed at your slab rate. Companies deduct 10% TDS if dividends exceed ₹5,000 in a year.
What is yield on cost?
The dividend measured against the price you originally paid rather than today's price. For long-term holders of growing companies it can be several times the current yield.
Are dividend stocks better than growth stocks?
Neither is universally better. Dividends give predictable cash and suit income needs; growth companies reinvest instead and may compound faster.
Want the theory behind the numbers? Read our dividend guides on the Money Blog.
Written by Gurjeet Singh, Sharpen Solutions. Last reviewed 15 Oct 2026. Sources: Income Tax Department — slab rates, s.87A rebate, surcharge and 4% cess, AY 2026-27 (page updated 9 Jul 2026). How we check these numbers.