Income stocks pay out a higher dividend in relation to the share price than growth stocks. Higher dividends equal higher income, thus the name Income Stocks. Income stocks indicate a stable company that can afford consistent dividends, but they also do not promise very high growth. This implies that the stock price of such companies may not rise significantly. Preferred stocks are also considered income stocks.
IT is a good investment for those looking for a secondary source of income through low-risk stocks. Dividend income from income stocks is not taxed, making it ideal for low-risk investors seeking long-term growth. You could use the dividend yield metric to identify stocks with high dividend yields.
Dividend yield is a measure of your earnings as an investor (earnings per share) based on the total dividends received. Divide the dividend by the announced share price to arrive at this figure. It is then represented as a percentage. For example, if a stock costs INR 100 and pays a dividend of INR 5 per share, the yield is 5%.