Widely read:
It’s easy to forgive Indian investors for hardly ever bothering about the dividend yield of companies. But in bad times like these, when the chances of capital gains look far and dim, chasing dividend yield is not a bad strategy to follow.
Currently there are 405 BSE stocks that are being traded at over 6 per cent dividend yield. This means that if you buy these stocks at the current levels, then regardless of their future price movements, you would still be earning a constant dividend yield, provided the company maintains the present rate of dividend payout. Furthermore, dividend yield stocks are also considered to be less volatile than the non-dividend paying stocks.
Apart from the stocks, there are six mutual funds that are designed to invest in high dividend yield stocks. But unfortunately in the bull run, these stocks were overlooked because growth stocks were just irresistible. But the emergence of the bears has given these funds a new lease of life. They are now counted amongst the top performing funds.
The bottom line is that this theme is hard to follow in good times, but should not be ignored during the kind of uncertain market conditions that exist now.
However, investors mustn’t jump into this theory by just picking the current highest dividend yielding stock to invest in. Just the latest dividend doesn’t tell much. A history of regular dividend payout has to be combined with the high dividend yield to strengthen the investment logic.
To know more about the importance of regular dividend payouts and understand the post-crash dividend scenario, pick up the March 2009 issue of Wealth Insight.
The magazine holds loads of useful investment know-hows, which can go a long way in helping you create a winning portfolio.
Click here to subscribe to Wealth Insight today or get in touch with your nearest vendor.
This article was originally published on March 15, 2009.
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