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Indian Stock Market Analysis–hunt For Dividends
Total Articles: 6
When looking for dividend paying companies it is important to focus on the dividend yield more than on the annual one. It is pointless to buy a stock which pays Rs. 50 annual dividend if it trades at Rs. 5500. On the other had a stock which has consistently paid an annual dividend of Rs. 2 will make a lot more investment sense if you can buy it for let’s say Rs. 20. What’s the difference in the 2 scenarios? - Dividend yield. It is ratio tool for assessing the amount of return which an investor can make in the firm of regular dividend payments on his investment. It is calculated by dividing the amount paid by the price of the share and is expressed in percentage terms.
i.e., dividend yield = annual dividend per share / price per share*100
Making a list of the companies is not very difficult. There are multiple sites which conduct Indian stock market analysis where you can get a list of the highest dividend paying stocks in India. What is more important is to pick stocks which will improve or maintain their yields in future. The best way to start on this track is to focus on companies which have been consistent with their payments in past. Further, a consistent trend of rising dividend payouts is a positive sign. Many good investors also focus on dividend payout ratio to check for consistency. On looking at the good website, you will find a list of the top dividend paying stocks in India. The list is comprehensive and is regularly updated based on multiple parameters.
The interesting thing to take away from this list however is the fact that it does not always include the highest one in the list. The focus seems to be on two things:
-Finding safe stocks which will continue to pay high dividend yields and are most likely to grow their amounts in future.
-Getting them at a time when they become available for cheap.
Some of the stocks suggested by the site have had the most consistent records and were recommended at a time when they were available really cheap. However, an interesting point mentioned in the research is that it -- is not the consistency, but consistency of profits being generated by the company which should be looked at. Dividends are nothing more than the portion of profits generated by the company which are returned to shareholders. So unless there is profit, there can be no dividends. Oftentimes, companies may pay a high rate of it by utilizing their reserves just to match their previous yields (i.e. even though they made a loss in the year). Hence keeping a close watch on the trend in profitability figures of the company is a lot more important than merely looking at consistency in the payments.
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