A healthy dividend yield and sound business prospects provides the twin advantage of a consistent cash inflow and potential for capital appreciation.
With inflation ruling high at nearly 12 per cent, investments in debt instruments including bank deposits that offer about 10 per cent returns per annum have turned unattractive as the real rate of return works out to be negative.
Considering the other adverse factors like high crude oil and commodity prices and the economic slowdown being experienced in India and globally, even equities do not look attractive.
But, amid these gloomy times, there is a ray of hope in the form of high dividend yield stocks, which typically do relatively better during market downturns while offering reasonably good upsides when the investment environment turns favourable.
Judicious selection of stocks though is very crucial. For instance, it is advisable to consider factors like consistent track record (financial and dividend paying), company's strengths in its business and its market position, positive cash-flows, management quality, sound business model and ability to sustain growth rates.
If these are in place, it will at least ensure that the company sustains the dividend payouts, if not increase, even during bad times.
Now, if valuations are also reasonably attractive, it makes a strong case for investment. Here are 10 companies that offer healthy dividend yields and good potential for upside over the next 12-15 months. Read on. . .
Text: Jitendra Kumar Gupta, with inputs from Vishal Chhabria & Ram Prasad Sahu.
Image: The bronze bull outside the Bombay Stock Exchange. | Photograph: Pal Pillai/AFP/Getty Images
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