High-yield stocks are shares of companies that pay dividends at a significantly higher rate compared to the average in the stock market. These dividends are typically paid quarterly and provide investors with a steady income stream, making high-yield stocks popular among income-focused investors such as retirees.

The "yield" is calculated by dividing the annual dividend per share by the stock’s current market price. For example, if a company pays $4 annually in dividends and its stock trades at $50, the yield is 8%. Yields above 4%–6% are usually considered high, but this can vary depending on market conditions and sector.

High-yield stocks are often found in mature industries, such as utilities, real estate investment trusts (REITs), telecommunications, and consumer staples—sectors where companies generate stable cash flows. However, a very high yield may also indicate potential risk, such as financial troubles or an unsustainable dividend.

Investors must research whether the dividend is sustainable based on the company's earnings, debt levels, and payout ratio. A consistently high yield backed by strong fundamentals is attractive, but chasing high yields blindly can lead to capital losses. In short, high-yield stocks offer income potential but require careful evaluation.