Dividend Yield: Real Income, Real Traps

Dividend yield is the interest-rate lens on a stock: cash paid to you per year ÷ price you pay, in percent. A ₹500 stock paying ₹10 over the year yields 2%.

How SelectStock computes it (this matters)

Many data feeds carry stale or plain wrong yield fields — we found stocks flagged at 13% that had paid *nothing* in a year. So we compute yield from actual payment records: every dividend the company really paid in the trailing 12 months, summed, divided by today's price. Ground truth or a "—", never a guess.

The high-yield trap

Sort any market by yield and the top is a graveyard. A 9–12% yield usually means the price collapsed (yield = dividend ÷ price — a crashing denominator inflates it) and the market is betting the dividend gets cut. When the cut arrives, you lose the income *and* hold a fallen stock. Sustainable Indian yields typically live in the 1–5% range; treat anything far above that as a claim requiring proof.

The trailing-yield caveat

Yields are backward-looking by convention (ours included, like every major platform). A company that paid a fat one-time special dividend — say after selling a division — shows a juicy trailing yield that will *not* repeat. The fix takes one minute: open the stock's News & Events for the dividend filings and see whether payouts are regular or a one-off.

What yield is actually for

Income investors: pair a decent yield (2–4%) with a payout the profits comfortably cover and a rising EPS — that's a raise every year. Growth investors: a small-but-growing dividend is best read as a *governance signal* — management returning real cash is the hardest fundamental to fake.