Dividends are a way for mature, profitable companies to return cash to shareholders. Growth companies often pay no dividends and reinvest profits instead; large stable companies (utilities, banks, consumer goods) frequently pay 2–6% of share price per year in dividends.
Dividend yield is the annual dividend per share divided by the share price. A EUR 50 share paying EUR 2/year has a 4% yield. Total return on a share is dividends plus capital gains; for long-term equity returns, reinvested dividends typically contribute more than half of total return over decades.
Tax treatment varies. Switzerland charges a 35% withholding tax (reclaimable for residents). Germany applies a 25% Abgeltungsteuer. France integrates dividends into income tax with a 30% flat-rate option. Italy uses a 26% flat-rate withholding.
Dividend yield = Annual dividend per share / Share price
Nestlé pays a CHF 3.05 dividend on a CHF 80 share, giving a 3.8% yield. EUR 10,000 invested generates roughly EUR 380 of dividend income per year before tax.