K. ARAVIND
The NFO (New Fund Offer) of Dividend Yield Funds is now attracting investors. Dividend Yield Funds are mainly invested funds in companies that offer high returns through dividends. Such funds focus on stocks with high dividend yields (what percentage of the share price dividends means dividend yields) in the portfolio.
Investors who aim to earn higher dividends through investments in companies should mainly consider the dividend yield on shares. High dividend yielding stocks are the stocks that give investors the highest return through dividends.
Dividend yield refers to the percentage of the share price that investors receive as dividends. For example, a stock with a face value of Rs.10 trades at Rs.100. If the company declares a 50 per cent dividend, the shareholders will receive a dividend of 5 per cent of the share price. That is, the dividend yield on this stock is 5%.
Dividend Yield Funds are suitable for those who want to invest in equities that offer the best dividend yields, just as there are opportunities for those who want to invest in banking stocks to choose from the banking sector funds. Ordinary investors who are unable to conduct research to select and invest in the best dividend-yielding stocks can seek the help of fund managers through Dividend Yield Funds.
The first criterion that managers of Dividend Yield Funds look for when selecting stocks is the best dividend yield. Fund managers provide investors with the opportunity to invest in a portfolio of low volatility and relatively stable stocks by choosing stocks that are stable in cash flow and pay dividends regularly.
One of the main problems faced by investors is that companies do not necessary pay dividends. This means that companies are still not guaranteed to pay dividends. This is why it is important to choose companies with a consistently high dividend payback history.
It is reasonable to assume that companies that have already paid dividends even when performance is poor will continue to pay dividends. Dividend Yield Funds select and invest in such top companies.
Dividend-yield funds are less likely to invest in high-growth stocks during periods of market downturn. Dividend-yield funds can perform better as dividends increase the attractiveness of such stocks as they are a positive gain in the face of market downturns.
