Question 1

What is dividend yield?

Accepted Answer

Dividend yield is the annual dividend per share divided by the share price, expressed as a percentage. For example, if a stock priced at Rs 1,000 pays Rs 30 per share as annual dividend, the dividend yield is 3%. Higher yield means more income per rupee invested, but very high yields may indicate risk or a falling share price.

Question 2

How are dividends taxed in India?

Accepted Answer

Dividends are taxable in the hands of the investor at their applicable income tax slab rate. Additionally, TDS of 10% is deducted if total dividend income exceeds Rs 5,000 in a financial year. High-income earners effectively pay 30%+ tax on dividend income, making growth-oriented investing more tax-efficient for them.

Question 3

What is a good dividend yield for Indian stocks?

Accepted Answer

For Indian stocks, a dividend yield of 2-4% is considered healthy. Yields above 5% are high but may signal stagnant growth or unsustainable payouts. Blue-chip companies like ITC, Coal India, and Power Grid typically offer yields in the 3-6% range. Always compare yield with payout ratio and earnings growth.

Financial Calculators