Direct investing in stocks that pays high dividends is not easy. The other option you have in hand to earn stable dividends is by investing in dividend yield funds. Such Mutual Funds invests in companies that has both high & consistent dividend payouts. The objective of dividend mutual funds is to maximize the dividend yield for its investors.
Let’s try to understand this by an example. Suppose a company X which has market price of $20 per share. The company decided to distribute $2 per share as dividend. In this case the dividend yield will be 10%. By a rule of thumb, any dividend yield above 3.5% can be considered as reasonable. Investors must keep this in mind that only blue chip companies (companies having quality and established products) pay high dividends with reasonable predictability.
Value investors do prefer stocks that pays high dividends. Income in the form of dividends are perhaps the best source of guaranteed future earnings. Particularly if you are investing in blue chip stocks, assurance of dividend income in future is well qualified. Investing in such blue chip stocks provide double benefits, not only investors earns in short term in the form of dividend payouts and also benefit in long term from price appreciation.
Not many dividend yield funds exist in India. As on today, only seven such funds are present in the market:
1) Birla Sun Life Dividend Yield Plus
2) BNP Paribus Dividend Yield Funds
3) ING Dividend Yield Fund
4) Escorts High Yield Equity Plan
5) UTI Dividend Yield Fund
6) Tata Dividend Yield Fund
7) Principal Dividend Yield Fund
These dividend yield funds invests heavily in sectors like Banking, IT, Cement, Steel, Power, Refineries etc.
On account of dividend yield mutual funds, paying consistent income to their investors in the form of dividends, hence investors have more tendency to stick with them (no selling) for long term. Hence these funds are comparatively less volatile than other mutual funds. Investors who are in their late forties or nearing retirement can well consider investing in dividend yield mutual funds.
In today’s Sensex levels, there are several quality stocks that is trading with attractive dividend yield levels. Some companies are trading at such fantastic price levels that dividend is even higher than interest earned on fixed deposits (after tax). Our Dividend yield funds always remain in search of such times, when they can bag some quality stocks that pays high dividend yields. At present market levels these dividend yield mutual funds must look at the following quality stocks as listed below:
(1) ONGC (3.13%)
(2) IOC (4.09%)
(3) SAIL (2.98%)
(4) BAJAJ AUTO (2.59%)
(5) HCL INFOSYSTEM (10.88%)
(6) ASHOK LEYLAND (8.03%)
(7) SHIPPING CORPORATION OF INDIA (5.94%)
(8) INDIA BULLS FINANCIAL SERVICES (6.81%)
Conclusion
We have already seen that value investors will prefer dividend mutual funds than other funds. The reason being that not only it is possible to have regular streams of income in form of dividends but also allows investors to take opportunity of market price appreciation. An investors who wish to start the process of investing though value investing route may well consider high dividend yield mutual funds as their starting point.
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how to invest and how i will get the high dividend thanks
Dividend stocks is always a good option to be invested. It give a good return as well as a secure investment.