As we all know that High Dividend Yield Stocks can be consider as a safe haven where safety has greater priority compared to high returns. Specially, when the market remains volatile and lot of uncertainty arises due to headwinds coming from Domestic and Globally. Investors can still get a decent return on the Investment made in High Dividend Yield Stocks. Investing in a such kind of High Dividend paying companies is also one of Value Investing Strategy.
Value Investors look at the Intrinsic Value of a firm. They hold stocks for long term and look to gain from dividends, capital appreciation, buybacks, bonus issues etc. One of the indicators of a firm’s value to the shareholders is its dividend yield.
Dividend:
A sum of money paid regularly (typically quarterly) by a company to its shareholders out of its profits (or reserves). Dividends are mostly paid quarterly or annually.
Why is dividend important?
Dividend is a direct income for a shareholder without selling any of the holdings. Therefore a shareholder can hold on to the stock and still earn an income sitting at home. In a bull market, dividend would add to the overall capital appreciation and improve gains. In a bear market, a high dividend stock can offset some of the capital loss. Hence, a high dividend stock would always find favor in any market conditions. Rising dividends also indicate financial soundness of a firm and a strong cash flow.
Dividend Yield:
Dividend yield gives the income earned from stock holding from dividends alone. It is calculated on the basis of the dividend paid per share and the current market price per share.
Dividend Yield = (Dividend per share/CMP) x 100
For example, HCL Info’s dividend yield is given by: Dividend Yield = (8/39) x 100 = 20%
This implies, if the earnings and dividend payout ratio remains the same for this financial year, if an investor purchases shares of HCL Info at current market price, he/she would earn a return of 20% from dividends alone.
Criteria for Selection of High Dividend Yield Stocks:
We have taken S&P CNX 500 as a benchmark for Stock selection. We have qualify the companies from CNX 500 which is giving regular Dividends since last 5 years with Dividend Yield > 3.50% along with maintained Dividend Yield 3% or more in the last 5 Years. We have also considered the valuation of selected companies such as Low P/E ratio with cheaper than Industry along with Price to Book Value less than 2. Below is the List of qualified companies as per the mention criteria.
| High Dividend Yield Stocks | |||||||
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Sr. No |
Company Name | Sector | Latest Price (Rs) | Face Value (Rs) | Dividend Per Share (Rs) | Dividend (%) | Dividend Yield (%) |
| 1 | HCL Infosystems Ltd. | IT – Hardware | 39.20 | 2.00 | 8.00 | 400.00 | 20.41 |
| 2 | PSL Ltd. | Steel & Iron Products | 58.45 | 10.00 | 4.00 | 40.00 | 6.84 |
| 3 | SRF Ltd. | Textile – Manmade Fibres | 207.75 | 10.00 | 14.00 | 140.00 | 6.74 |
| 4 | Andhra Bank | Bank – Public | 99.55 | 10.00 | 5.50 | 55.00 | 5.52 |
| 5 | Corporation Bank | Bank- Public | 402.70 | 10.00 | 20.50 | 205.00 | 5.09 |
| 6 | Aarti Industries Ltd. | Chemicals | 72.70 | 5.00 | 3.50 | 70.00 | 4.81 |
| 7 | Allahabad Bank | Bank – Public | 133.15 | 10.00 | 6.00 | 60.00 | 4.51 |
| 8 | Balmer Lawrie & Company Ltd. | Diversified | 588.25 | 10.00 | 26.00 | 260.00 | 4.42 |
| 9 | Graphite India Ltd. | Electrodes & Welding Equipment | 82.05 | 2.00 | 3.50 | 175.00 | 4.27 |
| 10 | Indian Bank | Bank – Public | 176.00 | 10.00 | 7.50 | 75.00 | 4.26 |
| 11 | Deepak Fertilisers & Petrochemicals Corpn. Ltd. | Fertilizers | 131.45 | 10.00 | 5.50 | 55.00 | 4.18 |
| 12 | Syndicate Bank | Bank – Public | 96.75 | 10.00 | 3.80 | 38.00 | 3.93 |
| 13 | Jammu & Kashmir Bank Ltd. | Bank- Private | 935.70 | 10.00 | 33.50 | 335.00 | 3.58 |
| 14 | Bajaj Holdings & Investment Ltd | Finance – Investment | 751.40 | 10.00 | 25.00 | 250.00 | 3.33 |
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very well written article.Will have to invest in some shares I guess
hello sir, main one lakh rupess investment karna chahta hun. kaha per karu jis se kuch income bhi hoti rahe divedent ke madyam se. please give the ideas
invest in balmerlawrie it is the highest dividend payout company with 260% dividend
Hello sir, main 2 lakh lagana chahta hu
To supplement above informative article, here is another one:
How investing in bank stocks different from the rest?
The business of banking falls under priority services and all banks whether public or private in India need to comply with stringent guidelines by the RBI. While NPAs (non performing assets) are part of their businesses, there is a limit set by RBI as part of good governance. New banks are allowed to float only after they demonstrate they are here for a long run.
While steel plants and the business of jewelry should also be relevant for years and decades to come, there is a difference: banks finance all kinds of businesses from small retailers to large corporates and government projects. In other words by investing in bank stocks, one gets an exposure to growth of economy as a whole. It is said that banking closely mirrors the economy.
There are many businesses (like a firm producing accounting software) which did not exist few decades back and one cannot be sure what lies ahead in few years time with rapidly changing distribution channel/consumer taste/change in technology. For such stocks, it is difficult to spot right time to exit and passive shareholders who are taught to invest for long term often lose a significant part of portfolio.
Government-owned banks (PSUs) are also a vehicle that keeps the government running by generating income through dividends. Most of these banks in good times declare rich dividends ensuring that you also earn decent yearly income in case you stay invested. There are also a couple of more advantages in dividend play including dividend income not taxable (like in India) and dividend stripping.
You can of course spread risk by investing in a number of public and private sector banks as under exceptional circumstance a bank too can go bust as evident in the Global Trust Bank fiasco (2004). This also helps optimize returns from dividends, and a way to optimize the same can be through investing in mutual funds focused on bank stocks like Reliance Banking Fund, Religare Banking Fund, and UTI Banking. These mutual funds, in addition to bank stocks, may also invest in companies engaged in financial service activities (UTI Banking Sector Fund) or companies engaged in allied activities related to the banking sector (Reliance Banking Fund).