Stock market investors look for returns in two ways: betting on stock prices going up, or through dividends, where companies share a part of their profits.

This is where dividend yield comes in. It tells you how much cash a company has distributed to investors each year as a percentage of its stock price. The broader market currently offers a dividend yield of about 1.3%. A stock with a higher yield may not always be paying more. Sometimes the yield rises because the stock price has fallen, making the same dividend look better.

When markets become volatile like right now, it becomes harder for investors to predict share price gains.Periodic income streams like dividends become more popular. As JPMorgan notes, “Dividends may contribute more to total returns when upside in stocks is limited.”

In this edition of Chart of the Week, we look at how dividend yields have moved over the past year. The focus is on companies where dividend payouts are backed by consistent earnings, cash inflows, and low debt.

IT: Strong order books despite AI hype, support dividend yields

With a dividend yield of about 3.1%, the Indian IT sector sits at the top. In addition to stable dividend payouts, falling stock prices have pushed dividend yields higher.

Globally, most companies have shifted their spending toward AI-led work and cost-saving programs. Even so, a large share of revenue for Indian tech continues to come from existing clients through their ongoing contracts, ensuring regular cash inflows.

Within the IT space, Wipro is a juggernaut, boasting a dividend yield of 5.5%. This is supported by its cash flows from core operations, which were about 135% of its net profit in Q3FY26. 

MD & CEO Srini Pallia noted, “Demand is being led by cost optimisation and vendor consolidation programs.” Wipro also sits on a cash pile of about $6.5 billion, giving it an added cushion to offer payouts even during weaker growth periods. 

Infosys, another giant in this sector, generated about $915 million in free cash flows in Q3FY26. The company also holds about $3.9 billion in cash and investments, supporting a dividend yield of around 3.4%, even as it continues to invest in large deals and AI-led growth.

Cyient reported free cash flows of about Rs 236 crore in Q3FY26, equivalent to nearly 158% of its net profit. It ended the quarter with a net cash position of Rs 1,434 crore, supporting its dividend yield of around 3.4%. New deals grew about 36% over the past year, while a shift toward higher-value projects and cost control supported margins and cash generation.

Tata Technologies has a dividend yield of around 2.1%. A larger share of its revenue now comes from software and embedded engineering, where revenue has grown over 60% annually over the past three years. This work is typically longer-term and recurring.

Mphasis moves against the tide of falling IT stocks. It has risen by about 9% over the past year and still offers a dividend yield of 2.4%. Growth in its banking and financial services segment, along with a doubling of deal wins over the past year, is bringing in more predictable cash.

Consumption dividends hold amid cost pressures

Across consumption sectors, dividend yields stand at about 2.1% for food, beverages & tobacco and 1.5% for FMCG.

ITC maintains a high dividend yield of 4.7%, supported by strong cash generation from its cigarette business. This segment contributes to nearly 80% of the company’s profits, while margins in its FMCG business expanded by about 145 basis points (bps) in Q3FY26. 

However, the stock has fallen sharply in the past year. Recent increases in excise duty on cigarettes could put some pressure on volumes and future growth. Considering this, Forecaster expects ITC’s dividend per share to slip by about 3.5% in FY27.

Hindustan Unilever's (HUL) dividend yield stands at about 2%. In Q3FY26, its gross margins expanded 30 bps, supported by pricing and product mix, keeping cash flows steady.

There are some concerns for these companies. Crude oil prices have surged amid supply disruptions linked to the Iran conflict, raising packaging and logistics costs. As Axis Securities noted, these additional costs could “compress margins by about 100–200 bps in the near term.”

Companies have responded with price hikes of up to 12%. HUL’s MD & CEO Rohit Jawa said, “We have adjusted prices carefully while keeping costs under control,” to protect margins and keep cash flows steady.

Cost efficiency drives dividends across AMCs and Nalco

In financials, the sector dividend yield stands at about 1.1%. Within this, asset managers and rating agencies stand out. Their asset-light models require limited reinvestment, allowing a larger share of profits to be distributed.

Strong inflows into mutual funds support this. Monthly SIP contributions crossed Rs 31,000 crore for the second consecutive month in January 2026.

Nippon Life India AMC offers a dividend yield of 2.1%, backed by profit growth, with net profit rising 37% in Q3FY26. Its assets under management (AUM) have grown over 20% in Q3FY26. This larger pool brings in higher fee income, which supports its payouts.

UTI AMC's core business continued to expand in Q3FY26. Mutual fund assets rose to about Rs 3.9 lakh crore, up 11.7%, supported by regular inflows across categories. This earnings base has enabled the company to maintain a dividend yield of around 5%, with about 94% of its net profit paid out as dividends in FY25.

Aditya Birla Sun Life AMC reported a 20% growth in net profit in Q3FY26. Its average AUM rose to about Rs 4.8 lakh crore, the highest so far, with consistent inflows across equity, passive and alternate segments.

A larger share of its business is now coming from higher-fee segments like portfolio management services (PMS) and alternative investment funds (AIF). This shift, along with overall growth, supports its dividend yield of around 2.5%.

Crisil’s dividend yield stands at 2.2%. Its ratings business delivers margins above 40%. With limited reinvestment needs, a large share of its earnings is available for distribution.

National Aluminium offers a dividend yield of 2.7%. The stock has risen more than 2.5x over the past year, as aluminium prices climbed over 48% due to supply constraints and the MidEast conflict. Costs remained relatively stable because the company sources much of its raw materials in-house. This helped expand margins and drove net profit growth of about 26% in 9MFY26, increasing the cash available for payouts.

Across companies, a similar dividend yield can come in different ways. What matters is not how high the yield looks today, but if the business can keep up the payouts by generating enough cash.