A TYPICAL market reaction in times of a downturn: investors start scouting for safer investment avenues. It's no different this time round. Investors are shifting focus to high dividend yield shares.

These stocks offer a high dividend payout in comparison to their share price. In the Indian scenario, one can find such stocks usually amongst public sector Units. So, the dividend yield is the latest dividend declared per share or current market price.

USP of companies issuing dividend yield stocks

1. They are usually stable and have a history of consistent profitability. They also have a dividend payment track record.

2. In case of a market crash, the share price of these companies is likely to fall less as compared to the so-called growth stocks, thus making them comparatively low-risk defensive stocks.

3. If inflation is controlled, we may see interest rates moving downwards, over the next six to 12 months. Thus the dividend yield may even work out more than bank interest rates.

4. These companies have the potential for capital appreciation (medium to long-term) once the markets recover. So, you can expect to earn a decent recurring income and capital gains over time.

Read:

• Why the stock market isn't a casino
• Secrets to stock market investing
• Get rich. Do NOTHING!
  
• Investing in mutual funds?

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e-mail: Sanjay Matai

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