Final answer:
Preferred stock is the kind of stock associated with a stated dividend rate. Dividends have historically been a significant part of total returns on stocks, but the proportion coming from dividends has decreased since the 1990s.
Step-by-step explanation:
The kind of stock associated with having a stated dividend rate is called preferred stock. When a company pays a dividend, it is distributing a portion of its profits to shareholders. Preferred stockholders are typically guaranteed a fixed dividend payment before any dividends are paid to common stockholders. This fixed dividend payment is expressed as either a percentage of the stock's par value or as a specific dollar amount per share. Companies like Coca-Cola or electric utilities often provide dividends to their stockholders, and these dividends can be a reliable source of income for investors who hold onto their stocks for an extended period of time.
Looking at the broader market, as seen in the S&P 500 index, dividends have historically provided a part of the total annual rate of return on stocks, which also includes capital gains from increases in stock value. From the 1950s through the 1980s, a typical firm in the index would pay dividends amounting to approximately 4% of its stock value annually. However, this dividend rate has seen a decline since the 1990s, and current rates are closer to 1% to 2%. Despite the decline in dividend rates, preferred stock continues to offer a steady return through its stated dividend rate.