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Slow and steady wins the race

Companies that have returned full invested capital by way of dividends and earnings over time

Slow and steady wins the race

In today's actively traded markets, we often lose sight of what really matters. What doesn't matter is making a quick buck in the market or jumping on a hot stock. Stodgy old companies can give you high gains as well. We will show you two ways how.

The dividend way
Very few investors look at the dividend policy of companies when investing, yet dividends matter, especially if you are a lazy investor who tends to buy and forget. A small group of companies (see the first table) have returned your initial investment in dividends faster than a fixed deposit. Here are the filters that we applied to arrive at these companies:

  • Market cap above Rs 200 crore
  • Payback period of less than nine years.

Payback period is the time an investment takes to return your invested amount. The reason for taking the payback period as less than nine years is that a normal fixed deposit returns your invested capital in about nine years, assuming an interest rate of 8 per cent.

We found 32 companies that have paid back your initial investment by way of dividends. They come from a diverse group of sectors and even include old economy companies like HPCL and BPCL.

Let's take BPCL. You could snap up BPCL shares at Rs 72 apiece 10 years back. This government regulated business that many investors don't give a second look at has returned to its investors Rs 164 in dividends in 10 years. Think about it. And we are not even talking about the stock price here.

Let's take the example of another well known dividend master. Castrol has a historical record of a high dividend payout. You could have picked up Castrol at Rs 32 apiece and receive Rs 78 in dividends over the last 10 years.

The earnings way
We also noticed a small group of companies that are today earning (per share) what they were trading at 10 years back (see the table below). For instance, Vardhman Textiles' earnings per share today is Rs 102. The stock was trading at Rs 106 a decade ago. One can assume that these stocks were significantly undervalued a decade back or their earnings went into an overdrive or both. Here are the filters that we applied:

  • Market cap above Rs 200 crore
  • Current stock price within 20 per cent of the TTM EPS.