Low-yield stocks are shares that pay relatively small dividends compared to their market price or industry averages. The dividend yield is calculated by dividing the annual dividend payment by the stock’s current price, expressed as a percentage. When this percentage is low, usually below 2%, the stock is considered low-yield. These companies often prefer reinvesting profits into business growth rather than distributing them to shareholders.

Low-yield stocks are commonly found in sectors such as technology, biotechnology, or growth-oriented industries where expansion takes priority over regular income payouts. For instance, firms like Amazon or Alphabet (Google) traditionally offer little or no dividends because they focus on innovation, acquisitions, and product development to increase long-term value.

Investors who choose low-yield stocks usually seek capital appreciation rather than steady income. They believe that the company’s growth potential will drive up the stock price, leading to higher returns over time. However, these stocks can be more volatile, and investors may need patience before realising gains.

Low-yield stocks are suitable for investors with a long-term outlook who don’t rely on dividends for regular income. They’re often part of a diversified portfolio where the goal is to balance growth and stability. Understanding the trade-off between dividend income and capital growth is key when evaluating whether low-yield stocks fit your investment strategy.