Posts Tagged ‘Company’

INVEST IN DIVIDEND PAYING COMPANY Final Part :)

Lots of market participants, who wish for regular income by way of dividends, look for stocks which maintain a steady or an upward trend of dividend declaration.

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Here is a list of few companies.

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Ideally, a low market price when combined with high dividend payout gives high dividend yields. Dividend yield is an uncomplicated tool for investor to evaluate his investments in stocks and to choose the right portfolio depending on his priority.

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Here are two things which will be very helpful for investor:

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Dividend-capture strategy – Investors using a dividend-capture strategy will simply buy the stock prior to the ex-dividend date, and would ensure that they would receive the payment by holding the security until the ex dividend date, and then sell the security. In theory, they should be able to quickly buy and sell a number of securities near their ex dividend dates and capture numerous dividends. However, in practice the truth is that this is not always the case.

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Dividend Arbitrage – It is an options trading strategy that involves purchasing put options and an equivalent amount of underlying stock before the ex-dividend date and then exercising the put after collecting the dividend. When used on a security with low volatility (causing lower options premiums) and a high dividend, dividend arbitrage can create profits, assuming very low to no risk.

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Concluding I would like to say that all investors have mainly two objectives. First is earning from capital appreciation and the second is profits from dividends. And, it is the skill of any stock to offer both these incomes that determine its market price. Investors can increase their returns by investing in dividend-yielding stocks, especially following a continuous stream of dividends. Considering the fact that dividends are tax free, it makes all the more sense to target these stocks.

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WANT GOOD RETURN, LOW RISK – INVEST IN DIVIDEND PAYING COMPANY Part 1 :)

Dividend= Extra Income. Investing in high dividend paying companies is wise decision as dividend paid is tax free at the hand of the investors; but what should be given greater importance is “preservation of capital”. In that case investors have a fine amount of dividend-paying stocks in portfolio. The tax on dividends is rewarded by the company at the time of announcement of the dividend.

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Well, the price of dividends may differ from company to company depending on profits earned, cash flows, investment and the policies of the company. Company announces a small size of earnings as dividends. The rest is used in business to spend and generate high returns. Final dividends are also a purpose of the future cash requirements of the company.

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A dividend is always paid on face value of the company. Dividend yield is considered as the ratio of the annual dividends amount announced to the existing market price of the company’s stock. The dividend yield ratio shows what investors earn on their stock. For example, a 10 percent dividend on Rs 100 equity share means a dividend of Re 10 per share.

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Dividend yield: Dividend yield is a financial ratio that shows how much a company pays out in dividends each year relative to its share price.In the absence of any capital gains, the dividend yield is the return on investment for a stock. It is often expressed as a percentage. Its reciprocal is the Price/Dividend ratio.

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To calculate dividend yield is main work to analyze the proper income from an investment. Dividend yield is a major determining factor for stock prices. Dividend yield is calculated as follows:

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It should be clear that dividend yield is not the same to the amount of dividend paid by a tax company. It is the dividend payout with reference to the market price of the company’s stock. While the dividend is received, it is computed as a percentage of the current market value of the share and is termed as the dividend yield.

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Dividend yield also specifies how an investor is prepared to pay for the predicted dividend stream generate by a single stock. Investor uses the projected dividend values over a period or past dividend values for the analysis.

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Dividend Payout Ratio The percentage of earnings paid to shareholders in dividends.

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The payout ratio provides an idea of how well earnings support the dividend payments. More mature companies tend to have a higher payout ratio. A dividend payout has a direct effect on the cash balance of a company. Some companies follow the policy of sustaining dividend payouts or gradually increasing them. These companies demand higher values in the stock markets as compared to the companies following erratic dividend payout policies.

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Preferred Dividend coverage ratio: Preferred Dividend coverage ratio is a coverage ratio that measures a company’s ability to pay off its required preferred dividend payments. A healthy company will have a high coverage ratio, indicating that it has little difficulty in paying off its preferred dividend requirements.

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This ratio gives investors an idea of a company’s ability to pay off its preferred dividend requirements, and also an idea how likely they are to be paid dividends. If the company has a hard time covering its preferred dividend requirements, common shareholders are less likely to receive a dividend payment on their holdings.

CESC Bags 140 mw Hydro Power Project in Himachal

CESC Ltd, the Power utility, has bagged a hydro power project from the Himachal Pradesh government on a competitive bidding process. The company has been allocated one project in Himachal Pradesh at Lara Sumta, Vice Chairman Sanjiv Goenka told.

He also said that the company would make an investment of Rs 46 billion as equity component in its power projects over the next 4-5 years and would require about Rs 100 billion as debt component for its projects.

CESC currently trading marginally lower by 0.58% at Rs 393.05. The stock hit an intraday high of Rs 396.90 till now, as against the 52-week high of Rs. 410. The stock hit a low of Rs 392 during the day. The stock had hit a 52-week low of Rs 180 on 12 March 2009.

The stock opens at Rs. 395.05 at BSE. The total traded volume of the scrip on BSE till now stood at 14147.

Meanwhile today, the BSE Sensex is trading with marginal losses of 7.42 points, or 0.04%, at 17,111.61. It has touched an intraday high of 17,275.19 and low of 17,068.37.

On BSE, 2,876 lakh shares were traded in the counter and out of that 1,110 stocks are in positive while 1,703 stocks are on he sellers” radar.

AB Nuvo has an equity capital of Rs 125.60 crore as of March 2009. The face value per share is Rs 10. At the current price of Rs 393.05, the P/E multiple stood at 11.99 with book Value of 233.87 and P/BV at 1.68.

Considering the current price, the stock had outperformed the market over the past one month till 13 November 2009, rising 5.26% as compared to the Sensex”s return of 1.55% and NSE Nifty”s of 2.09% return. It outperformed the market in past one quarter ending September 14, 2009, gaining 10.14% as against 5.53% rise in the Sensex and 6.13% rise in NSE Nifty.

CESC is a fully integrated power utility with its operation spanning the entire value chain: right from mining coal, generating power, transmission and distribution of power. We serve 2.3 million customers within 567 square kilometers of Kolkata and Howrah, delivering safe, cost-effective and reliable energy to our consumers. Even after 100 years of service, we still feel younger than ever.

The Company has posted a net profit after tax of Rs 1260 million for the quarter ended September 30, 2009 as compared to Rs 1240 million for the quarter ended September 30, 2008. Total Income has increased from Rs 7860 million for the quarter ended September 30, 2008 to Rs 9850 million for the quarter ended September 30, 2009.

Points to Remember while Selling Stocks – Part 1

Hello Friends here we come up with our another write up on “SMC Gyan Series”. 🙂


Points to remember while selling stock

Points to remember while selling stock

 

Buying a stock is simple, but Selling is actually harder as it requires regulation, understandable thoughts, and a tight rein on one’s emotions.

The ongoing optimism, slow economic revival, positive signs on the global front and high expectations from the stable government at home have forced bulls to give up their lethargic activities and to march northward.

Many investors who had seen the value of their stocks hit rock bottom and are now facing dilemma whether to sell or should they hold on? :O

Investors often face problems to take right decisions in volatile market as markets could head either way.

Wouldn’t it be disheartening if the markets rallied northwards, the day after you sold your stocks?

What if the markets come crashing down tomorrow, depriving you of the opportunity to enhance profits?

So, the decision to sell is critical.

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Some of the points when to sell your stocks:

Prima facie, if there is any drastic change in fundamental of a company, this should be the only reason to sell stock.

But a depth research has to be done before taking any decision.

Changes includes;

-restructuring of its business model,

-different business focus and directions.

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FIRST THREE POINTS :

1. Margins Crashed

Margins are the profit that a company makes on its sales.

Rising gross margins tell us that a company is reducing production costs or raising prices.

Conversely, deteriorating margins say either that production costs are increasing and the company can’t raise prices proportionally or that the company is cutting prices in an attempt to maintain marketshare.

If there are expenses related to a new product’s introduction then margins might fall for inoffensive reasons.

Falling margins, either gross or operating, often signal a declining competitive position. Thus it’s important to check both.

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2.Is There Any Drastic Change In Company’s Management?

If people in top management of the company say director or president who are liable for a company’s success begin to go away, there might be a few negative implications for the future outlook of that company as an investor.

You must look into and find out the root cause and also to see how much it could impact you.

If negative prospects, investor should sell the stock and should relocate the funds into a similar company that has stronger and more constant management.

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3. What First Fascinated You To The Stock, No Longer Applies

For example, let’s suppose that you bought a stock of a health care company because of its innovative products in the pharmaceutical field and all of a sudden, it loses a crucial patent for a life-saving medicine.

This may result in a decrease of market share in its industry, which might lead to a reduction in future profits (resulting in a decline in the value of its stock).

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Stay Tuned for more on this where we would touch upon other major points needed to keep in mind by investors before making any Buy and sell decision.

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QIPs Outstripped PE Funding & IPOs in Fund Raising Process ;)

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Qualified institutional placements (QIPs) have outstripped private equity (PE) funding since January by at least eight times, making it by far the most popular fund-raising route for firms this year.

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QIPs raised at least Rs. 21,209 crore since January this year, while PE funds invested only Rs. 2,574 crore in listed firms.

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QIPs have almost raised more than twice of initial public offerings.

A QIP is a private placement by a listed company of shares or securities convertible to equity with qualified institutional buyers approved by market regulator Securities and Exchange Board of India(SEBI).

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Data from Delhi-based investment bank SMC Capitals Ltd shows another 48 QIPs worth Rs.43,891 crore are in the pipeline.

But analysts do not expect a significant rise in the number of, or funds through, PE deals this year.

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Typically, PE investments take up to six months to complete, whereas a QIP can be done in up to four weeks, making the fund-raising process faster and more reliable since the institutional buyers are selected carefully.

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Also, in a QIP, the institutional buyers rarely seek a seat on the company board, or management control, a common practice in large PE deals.

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Since PE is perceptionally intrusive for promoters, QIP serves as a good alternative.

However this QIP structure is liked by investors and firms as in a QIP the window is shorter and money can be raised quickly.

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While real estate firms typically prefer QIPs for their need of capital at short notice, the companies currently waiting to do QIPs are across sectors, including telecom, entertainment, retail and information technology.

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In line for QIPs are Reliance Communications Ltd, Pyramid Saimira Theatre Ltd, Pantaloon Retail (India) Ltd  and few more.

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Some firms, though, have taken both routes for their funding needs.

Historically, PE investments in India have been in the form of private investments in public enterprises, or PIPEs, which also happen to the only firms eligible for QIPs.

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“Private equity investors have missed the boat,” Jagannadham Thunuguntla, head of SMC Capitals, said in a statement.

Companies that are in the pipeline for QIPs may also look for American depository receipts or global depository receipts for funds, he  added.

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Bharti-MTN Deal May Hit Turbulent Weather with New Takeover Norms in Place!!

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The $23-billion equity swap deal proposed by Bharti Airtel and South Africa’s MTN may hit turbulent weather with India’s capital markets watchdog amending the merger and takeover norms involving international transactions, experts said Tuesday.

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In a move that surprised the corporate sector, the Securities and Exchange Board of India (SEBI) Tuesday said the mandatory open offer norm will be triggered even if the overseas equity holdings, in the form of global depository receipts or American depository shares, exceed 15 percent of the total paid-up capital of the target company.

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Earlier, the open offer was mandatory only when the acquisition of shares in the target company exceeded 15 percent during transactions entered into within the country, either through stock market operations or through preferential deals.

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In the Bharti-MTN deal, the two sides proposed to exchange shares in addition to payout of cash that exceeds 15 percent.

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Bharti had proposed to buy 36 percent of the South African company by offering shareholders half a Bharti share, whereas MTN was to get a 25 percent stake in the Indian telecom major for $2.9 billion by issuing global depository receipts.

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“In its existing form, the Bharti-MTN deal will become more complicated because of this amendment. The dynamics have changed and both MTN and Bharti will have to go back to the drawing board to see the deal through,” said SMC Capitals equity head Jagannadham Thunuguntla.

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As per the existing provisions of the SEBI takeover code, no acquirer can buy shares of 15 percent or more in a listed company without making an open offer to acquire a minimum of 20 percent of such listed company’s shares from the public shareholders.

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Announcing the changes in the takeover code, SEBI chairman C.B. Bhave also said that there would be no retrospective effect on earlier deals because of this amendment.

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Let’s Talk About Mutual Funds ;)

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Friends we will discuss now as to what are mutual funds before going on to seeing why to invest in mutual funds instead of stock 🙂

What is a Mutual Fund?

A mutual fund is an investment that pools money from many investors, and that money is used to invest in stocks, bonds and other securities.

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One mutual fund share includes a portion of a share of each stock held in the fund’s portfolio.

The stocks these mutual funds have are very fluid and are used for buying or redeeming and/or selling shares at a net asset value.

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Mutual funds posses shares of several companies and receive dividends in lieu of them and the earnings are distributed among the share holders.

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Who Decides What a Mutual Fund Invests In?

Mutual fund managers decide what securities to buy or sell guided by the mutual fund’s objectives.

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If a mutual fund’s objective is to invest in the energy sector, the manager cannot buy shares in technology stocks.

Fund objectives let you know what to expect now and in the future.

Mutual funds can be either or both of open ended and closed ended investment companies depending on their fund management pattern.

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An open-end fund offers to sell its shares (units) continuously to investors either in retail or in bulk without a limit on the number as opposed to a closed-end fund.

Closed end funds have limited number of shares.

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Why Invest in Mutual Funds Instead of Stock?

You can invest in both mutual funds and individual stocks, but mutual funds are particularly useful in some cases.

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*Diversification: If you do not have a lot of money to invest, creating your own diversified portfolio to spread risk will be difficult.

Diversification is automatic in mutual funds.

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*Time : Successful investors take hours every week to analyze their holdings, stock market conditions and to educate themselves further on investing.

Mutual funds are a wise choice for those who lack the time to follow stocks so closely.

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* Experience: Consistently investing well takes a few years of experience and learning from mistakes and successes.
If you are not experienced with trading stocks but want returns over and above what a savings account offers, investing in mutual funds is a good way to grow your personal assets.

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