In the case of stock-based investments, there are two types of yields that are commonly used. When the yield is calculated based on the purchase price, it is known as the yield on cost (YOC) or cost yield, and it is calculated as follows: Cost Yield = (Price Increase + Dividends Paid) / Purchase Price. An investor could be considered successful if he or she realized a profit of $20 ($120 - $100) through a price increase and also received $2 from a dividend paid by the company. Thus, the cost yield is equal to ($20 + $2) / $100 = 0.22, or 22 percent of the total cost. Despite the fact that most investors prefer to calculate yields using market prices rather than purchase prices, there are others who use the purchase price as a basis for their calculations. The current yield can be calculated using the following formula: Current Yield = (Price Increase + Dividend Paid) / Current Price. The current yield is equal to ($20 + $2) / $120 = 0.1833 or 18.33 percent, based on the current price. As a result of the inverse relationship between yield and stock price, when the value of a company's stock increases, the current yield decreases.

Stocks with a high yield are shares that offer investors above-average dividend payments compared to their market price. These dividends provide regular income, making such stocks attractive to income-focused investors, especially during low-interest-rate periods. High-yield stocks are often found in sectors like utilities, real estate, telecommunications, and energy, where companies generate stable cash flows. However, a high yield isn’t always a sign of strength—it can sometimes indicate that a company’s stock price has dropped due to financial trouble or declining earnings. Investors should evaluate the sustainability of the dividend by reviewing payout ratios, cash flow, and debt levels. When chosen wisely, high-yield stocks can balance income generation with long-term capital growth potential.

Stocks with a high yield attract investors looking for steady income through dividends. These stocks usually belong to established companies with strong cash flow and a consistent history of dividend payments. High-yield stocks are often found in sectors like utilities, real estate, telecommunications, and consumer goods. While they can provide a reliable income stream, investors should also be cautious. A very high yield can sometimes signal financial trouble or a declining stock price. It’s important to evaluate a company’s payout ratio, earnings stability, and long-term prospects before investing. Ideally, investors should look for firms that not only offer an attractive yield but also have the potential for dividend growth, ensuring both income and capital appreciation over time.