So far, 2018 has been a volatile year. If this volatility continues, High Dividend Yield stocks can be an interesting addition to your portfolio as they do better in uncertain times.
They are also good for those who would like some regular income along with the equity upside.
High dividend yield stocks, with a sustainable dividend, can also act like a bond with an optionality!
|Company||Market Cap||Current Market Price||Dividend Yield|
|National Aluminium||Rs 15,502 Cr||Rs 87.40||5.86%|
|NMDC Ltd||Rs 38,884 Cr||Rs 125.00||4.31%|
|Oracle Financial||Rs 35,053 Cr||Rs 4,153.55||4.14%|
A Brief Synopsis of the Three Stocks
This Mid Cap company, having MCap of Rs 15,502cr, was incorporated in 1981 as a Public-Sector Enterprise of the Govt. of India. It is Asia’s largest integrated Aluminium complex, encompassing bauxite mining, alumina refining, aluminium smelting and casting, power generation, rail and port operations.
The institutional holding of the company is high at 27.62%
Growth: Over the last 5 years, the company has shown a Sales growth of 5.8%. In the last 9 months, the Sales has grown at 22.8%, and PAT has grown at 171.2%
Stock Performance: The stock is up 29% over 1 year and 82.5% over the last 3 years.
The stock has a Buy Recommendation from Kotak Securities.
This Large Cap company, having MCap of Rs 38,884cr, is an Indian-based iron ore producer and exporter. The company is engaged in the exploration of a range of minerals including iron ore, copper, rock phosphate, lime stone, dolomite, gypsum, bentonite, magnesite, diamond, tin, tungsten, graphite and beach sands.
The institutional holding of the company is at 21%
Growth: Over the last 5 years, the company has shown a Sales growth of 0.99%. In the last 9 months, the Sales has grown at 29.8%, and PAT has grown at 30%
Stock Performance: The stock is down -1.15% over the last 1 year.
The stock has a Buy Recommendation from Motilal Oswal.
This Large Cap company, having MCap of Rs 35,053cr, is the subsidiary of Oracle Corporation. It is an IT solution provider to the banking industry. It claims to have over 900 customers in over 145 countries.
The institutional holding of the company is at 19%
Growth: Over the last 5 years, the company has shown a Sales growth of 7.5%. In the last 9 months, the Sales has grown at 2.3%, and PAT has grown at 4.6%
Stock Performance: The stock is up 16.6% over the last 1 year.
The stock has a Buy Recommendation from JM Financial.
How did we select these stocks?
In growing markets like India people generally buy stocks for increase in the share price, or capital gains. Dividend does not enter the calculation most of the time as dividend yields in India are low.
However, Dividend Yield stocks can be an interesting addition to your portfolio as they do better in uncertain times. They are also good for those who would like some regular income along with the equity upside.
A stock’s dividend yield is calculated as the company’s annual dividend per share divided by the current price of the stock.
The key to buying high dividend yield stock is also trying to figure out if this dividend is sustainable. This is very difficult, if not impossible. However, we have used some additional parameters as proxy to the sustainability of the dividend.
Along with the highest dividend yield, we have used the MojoExpert™ Screener to add the following criteria
- The Dividend Yield is high- Greater than 3%
- The Net Debt to Equity of the company is less than zero. This eliminates companies that pay dividend but also have borrowed funds. We prefer companies paying out from their own cashflows.
- Over the last one year the profit should have been at least flat. To maintain dividend the profit need not grow but it should not be declining.
- The Return on Capital Employed (ROCE) should be more than 12%. A high ROCE is a sign of high profitability of a business.
- Quality which is Good or Excellent.
- Market Cap is greater than Rs. 5000 cr.
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My descriptions, videos, presentations are only for educational and information purposes and under no circumstances should be used for making investment decisions. I cannot guarantee the accuracy of any information provided.
The stocks picks are based on my own research and personal views and sometimes are from newspapers, tv channel program, magazines, etc. No part of compensation is or will be directly or indirectly related to the views and recommendations of this research. I have not served as an officer director or employee of the company and have not been engaged in the market – making the activity of the company covered in the research report. Consult qualified financial advisor before making any investment decision.