Final answer:
Stocks with characteristics such as high dividend yield, low p/b ratio, and low p/e ratio are called value stocks. Dividends are profits paid to shareholders, and although once high, have declined over time, making capital gains more prominent in investor returns.
Step-by-step explanation:
Stocks that have common characteristics, such as high dividend yield, low p/b (price-to-book) ratio, and a low p/e (price-to-earnings) ratio, are traditionally called value stocks. Value stocks are typically shares of companies that are perceived to be undervalued by investors. They contrast with growth stocks, which are associated with companies expected to grow at an above-average rate compared to their industry or the market. It's important to note that while value stocks may offer high dividends and seem like a stable investment, they can also come with risks, as any changes in the market's perception of the company's value can affect the stock price.
Dividends are a portion of a company's profits paid out to shareholders, and companies that offer dividends, such as stable firms like Coca-Cola and electric companies, can be appealing for long-term investment. However, according to historical data from the S&P 500 index, dividend rates have declined over time, from about 4% to around 1% to 2%. This shift has made capital gains a more significant component of an investor's total return in recent decades.