The Sensex took 20 years to cross its first 10,000-mark and less than 20 months for the next 10,000 points.
The ride up, and the speed of it, took equity investing national. Stocks started being discussed not just in Mumbai local trains, but everywhere in India. Everyone was gung-ho. Many investors developed an appetite for high risk and invested in obscure mid- and small-cap stocks hoping to get very high returns.
On 22 February, the Sensex breached its lower circuit breaker. It is now trading at the 15,000-levels, over 29 per cent down from its all time high of 21,206.77. With this altered reality, investors lost their appetite for high-risk stocks. So, should investors look at stocks of dividend-paying companies? The advantage with these stocks is that even if the market price of the share goes down, the investor still earns dividends on his investment.
We have sorted the data to shortlist five dividend-paying stocks that you can add to your portfolio.
Parameters used. We used nine parameters to filter these stocks. Market capitalisation should be more than Rs 250 crore (Rs 2.5 billion). Face value per share should be Rs 10 or more. The stock must enjoy price-to-earning (PE) and price-to-book value ratios of less than 20 and 4, respectively.
A company can sustain distributing dividends as long as its earnings grow. So companies that have a growing profit after tax since 2005 were considered. They must also have had continuous yield (how much dividend one gets for every Rs 100 invested) of more than 1 per cent since 2002. Operating and net margins and return on net worth should be growing since 2005.
Text: Anand Rawani
Image: Stock traders work at a local brokerage firm in Mumbai | Photograph: Sajjad Hussain/AFP/Getty Images
Also read: Seven gems worth investing in
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