Dividend yield is calculated as dividend per share divided by share price, and building a portfolio centered on securities with a high figure is the basic idea behind high-dividend investing.
The underlying idea
Rather than focusing only on price appreciation, this approach places emphasis on receiving dividend income on an ongoing basis while holding a security. Dividend yield is a reference figure based on past results or a company's own forecast — it does not guarantee future dividends.
Benefits and points to keep in mind
Regular dividend income can be an appealing feature, but a high dividend yield can sometimes reflect a declining share price or underlying concerns about earnings, and there is also a risk that a company could reduce or eliminate its dividend due to weaker performance. It's important not to judge an investment on yield alone, and to also review financial condition and the sustainability of the dividend. Compared with other investment styles, neither approach is inherently superior — each has its own characteristics and points to keep in mind.