Wednesday, November 30, 2011

>INVESTMENT STRATEGY: Based on Dividend Yield

High Dividend Yield would be one of the factors to select stock in the current scenario where market is at its low.

High dividend yield becomes an important criteria for investment when stock prices are at
two year low and short term scenario is uncertain. Dividend yield is simply the amount of
dividends paid by the company, divided by the share price which is the clear cash return to
the share holder.

Investors expect dividends to increase as business profits improve on the other hand, companies
reduce dividend or eliminate dividends altogether, in response to economic recession and falling
profits or during the expansion phase. High dividend yield indicates the financial strength and
business safety of the company while low dividend yield in few cases is an indication of
overvaluation. In addition to this, high dividend yield also counteract inflation risks
associated with rising price levels and lost of purchasing power (economic fluctuation). We
have used dividend-yield as a yardstick to pick few of the stock which could provide some
protection against inflation and are potentially strong enough to participate in the market rally in
the long term.

We are recommending the five stocks with high dividend yield ratio (~3.5% or more) which are
considered to be fundamentally strong with, high level of cash, low debt to equity ratios, and
strong balance sheet. Any one or in combination the following stocks could be added to your
portfolio to get better overall returns.(dividend yield + capital appreciation)

To read more about: INVESTMENT STRATEGY