During the past several years, the dividend yields and payout ratios for most corporations have fallen appreciably. (The dividend yield is the annual dollar amount of dividend, divided by the price of the stock. The dividend payout ratio is the percentage of the company’s earnings per share that are paid as dividends.) As an example, the dividend yield on the Standard & Poors 500 stocks is just over a paltry 1 percent. Furthermore, many companies do not pay any dividends. General Electric, for example, has about a 1 percent dividend yield.
By contrast, some companies have huge dividend yields. Philip Morris pays over 7 percent; many utilities also pay high dividends. Companies that have lower dividend payout ratios and seek greater capital appreciation are termed growth stocks; those having higher dividend payouts are termed value stocks.