The current challenging times and the sharp correction in the equity markets have led to a dramatic fall in stock valuations. However, picking a stock for investment has also become an equally difficult task, given the increasing risk as corporate performance becomes unpredictable.
Little wonder then that stock markets have turned volatile and sentiment is weak. Investors have turned wary and their appetite for risk has almost vanished.
Simultaneously, interest rates have started falling and bank fixed deposits now provide a return of between 3.5 and 8 per cent annually, which suggests that returns on the so-called safer assets are diminishing.
In this scenario, the strategy to invest in high dividend yield stocks would make good sense. The Smart Investor crunched numbers of all companies listed on the BSE with a market capitalisation of over Rs 100 crore (Rs 1 billion) and a dividend yield of about five per cent or more.
In addition, factors like growth prospects, leverage (in terms of debt-to-equity), revenue track record and cash flows were also considered to arrive at the shortlist of nine investment-worthy companies.
These attributes should not only ensure dividends in future, but also indicate that there is potential for capital appreciation in the longer run. Apart from these nine companies, there are 15 more that offer high dividend yield and deserve attention.
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