Posts Tagged ‘Dividend’

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.

.

Here is a list of few companies.

.

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.

.

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

.


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.

.

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.

.

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.

.

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 β€œpreservation 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.

.

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.

.

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.

.

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.

.

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:

.

.

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.

.

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.

.

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

.

.


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.

.

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.

.

.

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.

Rights Given to MF holders By SEBI :)

MF-Investor-Rights

The recent move by SEBI, banning entry load and capping exit load, among other things, has turned the spotlight on the possible improvement in rights of mutual fund (MF) holders in the country.

πŸ™‚

Sure, we already have regulations in place. But the recent Sebi move points to improvement in investor rights.

The important rights that are available to MF holders are as below as per Sebi Regulations on MFs:

A) An investor is entitled to receive statements of accounts in 6 weeks from the date of request for unit certificates.

Every unit holder has the right to receive a copy of the annual statement and periodic statement regarding his transactions.

πŸ™‚

B) He also has a right to receive information about investment policies, objectives, financial position and general affairs of the scheme.

πŸ™‚

C) Trustees are bound disclose to unit holders any information that could adversely impact investments. Investors have the right to information regarding any adverse happening.

πŸ™‚

D) With prior Sebi approval, AMC can be terminate by 75% of the unit holders of the scheme present and voting at a special meeting.

πŸ™‚

E) He is eligible to receive dividend within 42 days of declaration, and the proceeds within 10 days from the date of redemption or repurchase.

πŸ™‚

F) They can also pass a resolution to wind-up the scheme.

πŸ™‚

G) An investor can also send complaints to Sebi, who will take up= the matter with the concerned MFs and follow them up till the issue is solved.

πŸ™‚

H) With the consent of 75% of the unit holders they have the right to approve any changes in the close ended scheme.

πŸ™‚

However in present world, usually no fund house takes an investor for granted, as nobody wants bad publicity.

Also, fund houses know that the Sebi is extremely serious about investor protection.

Still there is scope for more improvement.

πŸ™‚

When it comes to quantitative rights like receiving dividend or redemption cheque on time, things are very much in place.

πŸ™‚

However, when it comes to transparency or frequency of portfolio disclosure, things can still improve.

Transparency is a big issue in mutual fund industry.

Still there are schemes in market with strange and funny names, or the repackaged schemes where the investment objective and investment portfolio are not close to each other etc;
These can confuse investors.

😦

Another area which could improve is frequency of portfolio disclosure. Many Fund houses are lacking in the disclosure of portfolio twice a year, a choice given to them.

😦

So moral of the story is that before investing everybody should take necessary action to familiar with the scheme and at the same time should be aware of their rights and obligations.

πŸ™‚

Are There Any Advantages of Systematic Investment In ULIPs ??

 Benefits of ulips.jpg

The impact of economic recession on life insurance companies has gone unnoticed where not only premium incomes but also the employment potential of many companies has decreased.

😦

However, the global slowdown and resulting unpredictable stock indices have shaken public confidence in long-term financial planning and there is visible unwillingness to purchase an insurance policy and commit oneself to pay premiums regularly over a number of years.

😦

Moreover, the Sensex, over the last 25 years, suffered massive crashes in 1992-93, 2000-01 and 2008-09 at eight year intervals.

😦

However, there was no impact on the life insurance industry on earlier occasions, when the index crashed whereas till the opening of the insurance sector, the Life Insurance Corporation was marketing traditional products, considered symbols of stability and security, immune to the vagaries of the stock market.

πŸ™‚

Moreover, the new companies that came on the scene, trying to capitalize on the stock market boom, began marketing unit linked products, ignoring traditional products.

πŸ™‚

However, although the Sensex had crashed three times, it had advanced from just 245 in March 1984 to 9700 in March 2009, an annual growth of 16% while stock market indices tend to increase steadily under the influence of economic growth and inflation.

πŸ™‚

Nevertheless, under the impact of speculative forces, the growth can be uneven while investors can minimize, if not eliminate, the impact of speculative forces through systematic investment in ULIPs or mutual funds.

πŸ™‚

Moreover, under a unit linked plan, the premiums are invested in equities and the value of the units on any day moves broadly in line with the stock index on that day.

πŸ™‚

Suppose a person had taken out a ten year policy on March 31, 1984 and paid Rs. 1,000 every year.
Ignoring all charges and the dividend income from investments, what is the gross yield he can expect by March 1994?

πŸ™‚

Based on the changes in Sensex, the average yield will be 17.8 per cent. πŸ™‚

If the date of commencement had been March 1985 or 1986 … or 1999, the yield to maturity at the end of ten years would have varied between 4.8 per cent and 30.3 per cent.

πŸ™‚

And in four of the 16 cases the yield would have been negative.

The range of variation is quite wide and the chance of negative yield is 4 out of 16, or 25 per cent.

πŸ™‚

The range will narrow down and chances of negative yield come down with increasing policy terms.

The results will be still better with quarterly or monthly modes of premium payments.

πŸ™‚

This means that an investor in ULIPs should opt for a minimum term of 15 years and, preferably, a quarterly mode of payment.

And, having chosen a plan, he should select a fund with more than 50 per cent equity content.

πŸ™‚

Even if the market takes a sudden plunge after the policy is taken, be not panic and allow the policy to lapse.

One should pay the next premium in time.

With a lower net asset value, he can get more units for the same premium.

πŸ™‚

Market setbacks at the earlier stages of a policy will not significantly affect the yield to maturity.

πŸ™‚

But any setback in the last few years before maturity can reduce it considerably.

😦

It is therefore advised that the policy holder should start keeping a close watch on the NAV of the relevant fund and the market indices.

If there are indications of a downtrend, he should surrender the policy and take out the cash value.

πŸ™‚

By following the above steps one can insulate oneself, though not fully, from market fluctuations and hope to get a better return than what one can get from a traditional product.

πŸ™‚

A lucky few may even get a very high return while the unlucky ones may end up with very low or even negative returns.

πŸ™‚

Suppose a person had taken out a ten year policy on March 31, 1984 and paid Rs. 1,000 every year.

Ignoring all charges and the dividend income from investments, what is the gross yield he can expect by March 1994?

Based on the changes in Sensex, the average yield will be 17.8 per cent.

If the date of commencement had been March 1985 or 1986 … or 1999, the yield to maturity at the end of ten years would have varied between 4.8 per cent and 30.3 per cent.

And in four of the 16 cases the yield would have been negative.

The range of variation is quite wide and the chance of negative yield is 4 out of 16, or 25 per cent.

The range will narrow down and chances of negative yield come down with increasing policy terms.

The results will be still better with quarterly or monthly modes of premium payments.

If dividend incomes from investments and the fact that fund managers invariably outperform the market index are also taken into account, the net yield after deduction of charges may exceed the gross yield.

This means that an investor in ULIPs should opt for a minimum term of 15 years and, preferably, a quarterly mode of payment.

And, having chosen a plan, he should select a fund with more than 50 per cent equity content.

Even if the market takes a sudden plunge after the policy is taken, be not panic and allow the policy to lapse. He should pay the next premium in time. With a lower net asset value, he can get more units for the same premium.

Market setbacks at the earlier stages of a policy will not significantly affect the yield to maturity. But any setback in the last few years before maturity can reduce it considerably.

It is therefore advised that the policy holder should start keeping a close watch on the NAV of the relevant fund and the market indices. If there are indications of a downtrend, he should surrender the policy and take out the cash value.

By following the above steps one can insulate oneself, though not fully, from market fluctuations and hope to get a better return than what one can get from a traditional product.

A lucky few may even get a very high return while the unlucky ones may end up with very low or even negative returns.

Know how to make money in shares!!!

Make Money By shares

Everyone wants a piece of the stock market. And why not?

But do you know how shares reward an investor?

If you are a shareholder, there are two ways you can benefit from the profits of a company: capital appreciation or dividend.

Read on to understand how shares reward you. πŸ™‚

Dividends, dividends!

Usually, a company distributes part of the profit it earns as dividend.

Say a company earned a profit of Rs 1 crore (Rs 10 million) in 2004-05.

It keeps half that amount within the company.

πŸ™‚

This is used for a variety of purposes β€” buying more machinery, land or raw materials, building a new factory or setting up a new office. It could even be used to repay loans.

The other half is to be distributed as dividend. πŸ™‚

Assume the company has 10,000 shares.

This would mean half the profit β€” ie Rs 50 lakh (Rs 5 million) β€” would be divided by 10,000 shares.

So each share would earn Rs 500. The dividend would then be Rs 500 per share.

πŸ™‚

If you own 100 shares of the company, you get a cheque of Rs 50,000 (100 shares x Rs 500) from the company.

πŸ™‚


Everyone wants a piece of the stock market. And why not?

But do you know how shares reward an investor?

If you are a shareholder, there are two ways you can benefit from the profits of a company: capital appreciation or dividend.

Read on to understand how shares reward you.

Dividends, dividends!

Usually, a company distributes part of the profit it earns as dividend.

Say a company earned a profit of Rs 1 crore (Rs 10 million) in 2004-05.

It keeps half that amount within the company. This is used for a variety of purposes β€” buying more machinery, land or raw materials, building a new factory or setting up a new office. It could even be used to repay loans.

The other half is to be distributed as dividend.

Assume the company has 10,000 shares. This would mean half the profit β€” ie Rs 50 lakh (Rs 5 million) β€” would be divided by 10,000 shares.

So each share would earn Rs 500. The dividend would then be Rs 500 per share.

If you own 100 shares of the company, you get a cheque of Rs 50,000 (100 shares x Rs 500) from the company.