cmv28i02 divpayingstocks

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period. Besides, dividend on equity shares

is tax-free in the hands of investors. The

dividend distribution tax applicable is paidby the compan y. The present div idend

yield of PPL could be certainly alluring

for investors who like to gun for dividend

as a source of income.

Out here investors can monitor the stock

movement and try to invest at a lower price

to maximize yield. In this exercise, limit or-

ders can be used to invest at a lower price.

Invariably, this strategy could offer higher

yield. Another crucial advantage is the time

available to invest in high yield stocks. In-

vestors have ample time to invest in PPL.

For companies whose financial year be-

gins in April, March to mid May is theopportune time to explorer high dividend

yield companies or those that can pay hand-

some dividends. If investors take exposure

to companies post financial results are out,

stocks offering reasonably higher dividend

could witness a rally based on the quantum

of dividend announced.

For investors valuing dividend as a

steady source of income, a well laid out

strategy is critical. Around 90% of listed

companies close their books on 31 March

every year. Further, investors can antici-

pate profit for the full year based on the

results for the nine months and take ap-

propriate call.

This apart, generally stocks tend to wit-

ness correction once they go ex-dividend.

Therefore, investing in stocks with high

dividend yield ahead of annual results make

sense. In fact, the market is smart and takeslittle time to react and tap opportunities. A

rally in a stock post dividend announce-

ment wipes out gains for investors. For in-

vestors, it is better to invest early in antici-

pation of dividend, between March and mid

May, to earn handsome yield.

It goes without saying that it is difficult

to predict dividend payouts. Investors can

look at the stated dividend policy of a com-

pany, which is generally part of the annual

report. Also, investors should check past

track record to examine if it is in sync with

the dividend policy. Apart from the quan-

tum, the payout ratio, which is basicallyEPS paid as dividend, can be checked. Fur-

ther, investors can check the latest nine

months results to get an idea about profit

for the full year.

This method is still not full-proof as a

company could have capital investment

plans that could compel it to lower the divi-

dend payout. Besides, companies can

change the dividend policy.

Dividend-paying stocks

Low-hanging fruitsDDoowwnnssiiddeepprrootteeccttiioonnccoouullddbbeeaatttthheeccoossttooffccaappiittaallaapppprreecciiaattiioonnaannddnneeeeddttoorreemmaaiinnlloocckkeeddiinnaaffoorraaffuullllyyeeaarr

Paper Products (PPL) declared the results

for the financial year ended 31 December

2012 (CY 2012) early February 2013. Itreported 14.3% decline in profit after tax

(PAT) in CY 2012 over CY 2011. The com-

pany announced dividend of 130% on face

value of Rs 2, which translates into divi-

dend per share of Rs 2.6 per share. The

dividend payout ratio works out to around

36.2% considering its earning per share

(EPS) of Rs 7.18 for CY 2012.

The leading manufacturer of flexible

packaging material is known for paying divi-

dends on a consistent basis. Over the last

10 years, it has paid dividend in the range

of 50% to 150%. The dividend declared for

CY 2012 would be paid sometime in May2013 after receiving approval from share-

holders in its annual general meeting to be

held in due course.

At the current market price of Rs 63,

the dividend yield works out to little over

4%. This may sound unexciting consider-

ing the present high interest regime. How-

ever, this is certainly not on the lower s ide

if interest rates are viewed over a longer


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High dividend yield stocks could pro-

vide downside protection. Thus, it is rec-

ommended to risk-averse investors such as

senior citizens or those who are new to the

equity markets. The downside protection

works as follows. If a stock plunges, the

dividend yield goes up. This is seen as aninvestment opportunity to buy the battered

stock. The renewed buying helps the stock

to recover on the trading floor. Interest rates

offered by banks on fixed deposits can be

considered as a benchmark to determine if

the dividend yield is high or low.

The dividend yield ratio is calculated

as dividend per share (DPS) upon market

price. It is expressed in percentage. A higher

dividend yield means alluring investment

opportunity for investors. Besides, high

dividend yield stocks could have a lower

beta. This means lesser quantum of vola-

tility in comparison with the market.It is better to take into consideration

dividend paid per share (adjusted for stock-

split) while determining dividend yield in-

stead of dividend percentage. This is be-

cause investors could assume face value to

be Rs 10, which would not be the case. It is

better to take into consideration the total

dividend outgo upon market capitalisation

ratio for determining dividend yield.

Capital Markethas made an attempt to

narrow down companies that could reward

shareholders with high dividends. The ex-

ercise was started with 2,700 companies

listed on the Bombay Stock Exchange thatare fairly liquid. Companies whose latest

results for the financial year ended 31

March 2012 (FY 2012) were available were

only considered. Firms with market

capitalisation below Rs 50 crore were re-

moved from the database.

Next , companies that had reported

profit and paid dividend in all the last five

financial years were selected. Companies

to have reported loss in the nine months

ended 31 December 2012 were removed.

Further, companies reporting 75% and

above profit in the nine months ended 31

December 2012 compared with the profit

reported in FY 2012 were selected. The

idea was to identify potential candidates

that could offer high dividend yield. More-

over, this is necessary to predict the possi-

bility of dividend payment as there is no

guarantee that companies would continue

with high dividend unless they achieve the

level of profitability reported in the imme-

diate previous year.

(3.1%), Oil India (3.4%), Rural Electrifica-tion Corporation (3.1%) and Union Bank

(3.5%). Among mid-cap stocks, SJVN,

Indiabulls Financials, Bank of Maharashtra,

Tata Investment Corporation, and Dewan

Housing are offering dividend yield in ex-

cess of 4%. The large-cap category is de-

fined as companies with market

capitalisation over Rs 10000 crore and mid-

caps with market capitalisation between Rs

1000 crore and Rs 10000 crore.

There are certain risks attached with

this strategy. First, the shortlist is based

on anticipation that as the companies have

already achieved 75% or more PAT re-corded in FY 2012 in the nine months of

the current financial year their chances of

declaring the same or higher quantum of divi-

dend as in the previous year are good. This

could prove wrong. The last quarter could

be challenging for these companies and some

of them could report poor results. Further,

a firm may not reward its shareholders sim-

ply because it has earned handsome profit

as it could have other priorities and con-

cerns as well.

Likewise, companies that are in midst

of capacity expansion could skip dividend

to conserve cash. The challenging business

environment could compel firms to lower

dividend payouts. Investors should scan

the dividend policy of companies over three

to five years to form a view.

Another problem is that several com-

panies paying decent quantum of dividend

do it in an intelligent way: they pay in-

terim dividends on periodic basis. The first

advantage is dividend is not a one-time drain

Next, dividend yield based on dividendpaid in FY 2012 was determined. Firms

with dividend yield greater than 3% were

selected. At the end, there were 70 compa-

nies (see table: Time to sow).

Investors could monitor the stocks on

the list regularly, taking exposure on cor-

rection or at target price. This could im-

prove chances of getting higher yield. Im-

portantly, monitoring price levels is criti-

cal to spot the right opportunities as these

could be short-lived.

Consider Jagran Prakashan to under-

stand the methodology. The company re-

ported PAT of Rs 178.3 crore in FY 2012and Rs 191 crore in the nine months ended

31 December 2012. Thus, the probability

of the company maintaining the dividend

paid in FY 2012 is on the higher side. This

is provided the company does not have

any other pressing needs or capital expen-

diture that could compel it to reduce the

quantum of dividend. Jagran paid dividend

at the rate of 175% on face value of Rs 2

(dividend per share of Rs 3.5). At the cur-

rent market price of Rs 97.7, its dividend

yield works out to 3.6%.

Bank of Maharashtra has exceeded PAT

reported in FY 2012 in the nine months

itself and also offers decent dividend yield.

At the current market price of Rs 53.4, its

yield works out to 4.1%.The possibility

of companies that have already achieved

the profit level of FY 2012 in the first nine

months of FY 2013 of paying improved

dividend is reasonably on the higher side.

Large-cap companies offering dividend

yield in excess of 3% include Coal India

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on the cash flows of such firms. Second, it

also helps to have a loyal shareholder base

that dislikes portfolio churning.

If investors are looking for quick bucks

in the form of dividend or capital gain

based on the ra lly wi tnessed post an-

nouncement of dividend, companies pay-ing interim dividends are of no use. In such

cases, dividend yield could be illusionary.

Investors have to remain invested for one

complete year to receive the full quantum

of expected dividend.

In FY 2012, Indiabulls Financial Services

paid a dividend of 650% on face value of Rs

2, that is, dividend per share of Rs 13. Its

dividend yield at 4.9% is certainly on the

higher side. However, out of Rs 13, it paid

Rs 6 as interim dividend. Thus, investors

need to stay invested in the company

throughout the financial year to earn higher

dividend. Dividend paid between two gen-

eral body meetings of shareholders is termed

as interim dividend.

Ideally, investors should remove excep-

tional and extraordinary profit while deter-mining profit. Companies may or may not

pay dividend based on extraordinary profit.

Besides, investors should focus on regular

dividends or normalised dividend payouts

while calculating divided yields. This is be-

cause special dividends paid on occasions

such as anniversaries or higher dividend paid

on windfall gains could inflate the dividend

yield of the intermediate years.

Considering the fact that many small-

and mid-size companies have emerged as

offering high dividend yield, investors need

to exercise caution. They have to put em-

phasi s on the financ ial tra ck record of

these companies.

Companies with high dividend yields

could have limited opportunities to grow

their business. Thus, such companiesmay prefer to dole out cash. Such stocks

could be slow movers as well. Whats the

point in investing in a stagnant business

for sake of high dividends? In such cases,

scope for capital appreciation could be

very limited.

Equities is about taking risk and ben-

efiting out of the same. Growth potential

and high dividend yield could be a winning

combination for risk-averse investors.

S Khedekar

Time to sow

Stocks with dividend yield greater than 3%

COMPANY NETWORTH DEBT PAT DIVIDEND RONW CURRENT MARKET 52-WEEK 52-WEEK DY P/E P/BV

EQUITY (Rs cr) (%) (Rs cr) (%) MKT PRICE CAP LOW HIGH (%)

(Rs cr) RATIO (Rs) (Rs cr) (Rs) (Rs)

Coal India 40453.0 0.0 14788.2 100.0 6316.4 4 0.1 317.0 200197.0 301.2 386.0 3.2 1 2.5 4.9

Oil India 17739.5 0.0 3469.2 400.0 1142.2 20.8 547.4 32905.9 431.0 617.4 3.5 10.1 1.9

Rural Elec.Corp. 14805.9 5.8 2838.7 75.0 740.6 2 0.6 236.0 23299.1 142.0 267.5 3.2 6.4 1.6

Union Bank (I) 13133.9 0.0 1771.9 80.0 440.4 14.3 228.4 12571.8 150.1 288.0 3.5 5.9 1.0

SJVN 7822.3 0.2 1068.7 9.4 388.8 14.2 20.0 8273.2 18.4 23.0 4.7 8.2 1.1

Indiabulls Fin. 4905.5 3.7 998.1 650.0 405.0 20.8 263.1 8220.3 178.6 345.5 4.9 6.9 1.7

Syndicate Bank 8039.6 0.0 1314.4 38.0 228.7 17.9 121.7 7325.7 84.1 145.2 3.1 4.3 0.9

Dena Bank 4291.5 0.0 803.1 30.0 105.1 20.7 93.8 3283.6 80.0 128.0 3.2 3.5 0.8

Bank of Maha 3779.0 0 .0 436.8 22.0 129.7 11.3 53.4 3148.4 42.9 66.2 4.1 5.5 0.8

Jagran Prakashan 751.9 0.6 178.3 175.0 110.7 24.4 97.7 3089.8 78.0 117.5 3.6 13.2 4.1

St Bk of Bikaner 4164.9 0.0 652.0 145.0 101.5 1 8.6 429.6 3007.2 326.7 502.0 3.4 3.8 0.7

S B T 3866.2 0.0 510.5 180.0 90.0 13.9 546.6 2732.8 470.1 648.0 3.3 4.5 0.7

Tata Inv.Corpn. 1920.9 0.0 161.6 210.0 115.7 9.1 435.9 2401.5 416.5 535.0 4.8 14.1 1.3

Chambal Fert. 1701.2 1.9 158.3 19.0 79.1 7.6 56.1 2332.9 51.9 85.8 3.4 6.2 1.4

Dewan Housing 2021.5 11.3 323.7 91.0 106.1 17.7 174.6 2048.4 142.3 279.0 5.2 5.9 1.0

Guj Inds. Power 1439.5 0 .7 118.4 25.0 37.8 8.4 72.1 1090.5 56.4 84.1 3.5 5.8 0.8

Monsanto India 384.4 0.0 50.2 200.0 34.5 13.2 582.6 1005.6 575.6 755.0 3.4 17.3 2.6

Balmer Lawrie 758.5 0 .3 148.1 280.0 45.6 20.9 598.3 974.6 511.6 710.0 4.7 6.6 1.3

Sundram Fasten. 642.4 1.4 99.6 140.0 29.9 16.7 45.3 951.8 42.0 60.2 3.1 8.4 1.5

Hinduja Ventures 733.8 0.1 100.5 150.0 30.8 14.1 458.8 942.7 341.0 595.0 3.3 9.8 1.3

REI Agro 2697.3 1.7 397.9 50.0 49.5 15.5 9.6 919.7 7.6 15.6 5.4 1.8 0.3

Savita Oil Tech 437.7 0 .2 68.0 150.0 21.9 16.3 494.0 721.2 423.0 551.0 3.0 6.9 1.6

Praj Inds. 553.4 0.0 67.9 81.0 28.8 10.2 36.9 653.9 35.0 82.7 4.4 10.6 1.2

GIC Housing Fin 497.2 6 .9 59.0 45.0 24.2 12.3 119.1 641.1 83.4 156.6 3.8 7.3 1.3

Swaraj Engines 186.3 0 .0 52.8 130.0 16.1 31.2 431.0 535.3 382.5 528.5 3.0 9.8 2.9

Geojit BNP 411.7 0.1 19.5 75.0 17.1 5.2 22.2 507.1 14.6 28.8 3.4 7.1 1.2

IL&FS Inv Manage 233.4 0 .4 73.5 75.0 31.2 35.2 21.7 453.0 20.9 31.5 6.9 6.1 1.9


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K P R Mill Ltd 615.9 1.2 32.8 50.0 18.8 5.3 119.1 448.6 75.2 148.0 4.2 5.3 0.7

Balmer Law. Inv. 60.6 0.0 28.4 100.0 22.2 49.5 192.0 426.2 145.0 238.0 5.2 13.8 7.0

Empire Inds. 81.9 0.7 37.0 240.0 14.4 51.6 652.4 391.4 641.0 787.0 3.7 9.9 4.8

Mangalam Cement 427.3 0.1 56.0 60.0 16.0 13.7 143.1 381.9 120.1 192.7 4.2 4.4 0.9

Kirl. Ferrous 380.2 0.1 37.1 20.0 20.2 10.0 25.6 350.8 20.5 33.6 5.8 7.8 0.9

PNB Gilts 577.7 2.7 21.1 10.0 13.5 3.7 25.3 340.9 23.6 31.8 4.0 5.5 0.6

Dhunseri Petro. 700.3 0.9 31.1 45.0 15.8 3.3 94.0 329.2 92.0 131.1 4.8 5.2 0.5

Indrapr.Medical 159.3 0.5 27.0 16.0 14.7 17.5 35.0 320.4 32.4 43.5 4.6 10.8 2.0

Everest Inds. 249.5 0.4 52.8 70.0 10.6 19.5 209.1 316.9 119.0 282.7 3.3 5.1 1.3

Take Solutions 342.0 0.6 85.6 105.0 12.6 28.5 24.6 301.1 21.0 41.8 4.2 3.5 0.9

Hil Ltd 338.0 0.3 60.6 185.0 13.8 19.2 382.5 285.3 318.0 547.0 4.8 4.1 0.8

Nucleus Soft. 314.1 0.0 35.3 25.0 8.1 11.7 82.7 267.6 60.6 97.0 3.0 6.1 0.9

Century Enka 636.8 0.6 8.8 50.0 10.9 1.6 109.7 239.6 100.0 144.0 4.6 9.7 0.4

KCP Sugar &Inds. 201.4 0 .5 28.5 70.0 7.9 13.0 19.8 224.0 14.0 26.0 3.5 4.9 1.1

Repro India 164.6 1.2 35.0 100.0 10.8 21.3 175.7 191.3 166.1 258.2 5.7 4.9 1.2

Visaka Inds. 286.5 0.6 34.3 50.0 7.9 12.5 109.3 173.5 66.1 142.7 4.6 3.0 0.6

Surana Corp. 376.6 0.6 67.7 20.0 4.7 22.1 63.0 153.5 53.2 113.0 3.1 2.2 0.4

Cochin Minerals 80.3 0.3 57.1 120.0 9.4 99.7 189.6 148.5 137.8 347.5 6.3 2.1 1.8

Muthoot Cap.Serv 87.0 3.0 15.5 35.0 4.4 26.8 113.8 141.9 58.2 138.9 3.1 6.6 1.6

Cheviot Company 223.5 0 .1 28.9 130.0 5.9 13.6 294.9 133.0 289.0 371.7 4.4 4.2 0.6

First Leasing 334.0 3.8 31.6 18.0 4.1 9.9 50.8 115.7 46.0 76.8 3.5 3.8 0.3

Apcotex Industri 69.8 0.6 11.5 80.0 4.2 17.1 201.3 105.1 134.7 294.0 3.9 8.1 1.5

Kalpena Inds. 197.6 1.0 24.2 22.0 4.1 12.9 54.6 102.6 44.5 85.0 4.0 4.1 0.5

Gloster 84.1 0.6 18.9 200.0 5.2 22.5 390.0 102.2 307.0 479.0 5 .1 4 .5 1.2

Shivam Autotech 114.1 1.7 18.6 32.0 3.2 17.5 94.0 94.0 87.1 132.1 3.4 4.5 0.8

Prec. Wires (I) 191.5 0.4 14.2 30.0 3.5 7.6 73.2 84.6 69.1 94.0 4.1 5.0 0.4

Accel Frontline 97.5 0.6 3.8 15.0 3.6 3.6 27.6 82.8 25.1 38.5 4.4 15.1 0.8

Jocil 127.5 0.3 12.5 50.0 4.4 10.1 90.0 79.9 85.0 134.0 5.6 4.6 0.6

LKP Finance 158.4 0.7 3.6 20.0 2.6 2.3 61.4 79.9 52.0 76.0 3.3 7.8 0.5

Haldyn Glass 77.8 0.4 24.3 75.0 4.0 35.7 14.3 77.0 13.1 21.4 5.2 2.9 1.0

Indl.& Prud.Inv. 27.4 0 .0 5.2 550.0 3.2 19.6 1290.3 74.8 1200.0 1619.9 4.3 16.1 2.7

Thinksoft Global 75.5 0.0 11.4 50.0 5.0 15.6 72.3 73.2 40.0 123.4 6.9 3.6 1.0

Alchemist 90.6 2.4 23.9 20.0 5.5 26.0 52.8 71.5 48.0 76.9 7.7 2.3 0 .8

Panasonic Carbon 56.3 0.0 3.9 70.0 3.4 7.8 148.4 71.2 115.0 188.0 4.7 10.7 1.3

India Gelatine 100.2 0.0 7.1 25.0 2.4 6.0 75.1 70.6 30.6 107.9 3.3 4.7 0.7

Steelcast 59.6 1.4 14.1 60.0 2.5 26.9 40.5 67.4 38.0 63.8 3.7 3.5 1.1

Hitech Plast 88.0 1.0 10.6 16.0 2.1 9.3 50.9 67.0 46.0 74.0 3.1 7.1 0.8

Blue Star Info. 82.3 0.0 3.6 20.0 2.1 4.3 59.0 61.3 55.1 79.0 3.4 10.3 0.7

Narmada Gelatine 63.9 0.0 11.1 45.0 1.8 18.6 141.0 56.8 90.5 164.5 3.2 4.0 0.9

Vijay Shan. Bui. 109.4 0.5 9.5 8.0 2.1 9.0 20.9 54.7 13.9 35.5 3.8 7.8 0.5

Tantia Constr. 171.0 3.4 4.5 15.0 2.6 2.7 27.4 51.5 26.7 64.6 5.0 4.7 0.3

Mazda 65.9 0.0 10.0 40.0 1.7 16.2 120.4 51.3 80.1 148.0 3.3 3.8 0.8

Ram Ratna Wires 47.7 2.1 5.1 15.0 1.7 11.0 22.9 50.4 21.5 35.0 3.3 5.4 1.1

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COMPANY NETWORTH DEBT PAT DIVIDEND RONW CURRENT MARKET 52-WEEK 52-WEEK DY P/E P/BV

EQUITY (Rs cr) (%) Rs cr (%) MKT PRICE CAP LOW HIGH (%)

(Rs cr) RATIO (Rs) (Rs cr) (Rs) (Rs)

cmv28i02 divpayingstocks

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