Posts Tagged ‘Dividends’

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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Points to Remember while Selling Stocks – Part 2

Hello Friends here we come up with an extension of our previous blog, “Points to Remember while Selling Stocks Part 1”.

🙂

Points to Remember while Selling Stocks

Points to Remember while Selling Stocks

In previous Blog we had touched upon few points related to selling stock tips.

In this blog lets get to know more of valuable points in this regard.:)

Major points when to sell your stocks ( starting from 4th..three already being discussed in Blog 1)

4. Stock is Over Valued:

During bull market, high quality stocks appreciate value.

But more importantly, with so much hype around the stock, they are often set up for a fall.

Therefore, investor may use the strategy of selling them first and buy at lower price.

🙂

5. Need Some Cash-

Certain unexpected circumstances may affect the time when to sell stock.

It is not wrong to sell stock to solve your financial emergency, especially the underperforming one.

However, it is advisable to have some emergency cash funds.

After all, basic investing rules is to start investing if you have enough money.

🙂

6. A Change in Monetary Policy-

The Central Bank, RBI changes monetary policy if it perceives that inflation is heating up.

By raising interest rates, it contracts the money supply and slows down the financial system.

It is generally seen that stocks normally react negatively against the action, and some time markets become more volatile.

If you are not happy with this type of risk then you should move a portion of your portfolio into stocks that will not be as affected with such changes.

🙂

7. A Company Suddenly Cuts Dividends or Lower Income Estimates-

This event should be investigated carefully before making any judgment to sell.

For good reason, the board of directors might want to retain more of their earnings for internal growth, rather than paying them out in dividends.

Sell a company’s stock if the performance is down.

Investors must never sell the stock of a fine company if its price goes either ways significantly – up or down.

Falling earnings margins and slowing earnings must be treated as a warning signal.

Lastly, I would like to say that always do your homework (Research) well while selling a company’s stock; you can use either the top-down approach or the bottom-up approach.

Markets are often full of rumors. You cannot make money in the market by acting on market rumors.

Always listen to the stories, but remember you should do your own research–and do it thoroughly.

Make your buy or sell decision based on your analysis of the company, not on what others tell you to do.

🙂

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Let’s Talk About Mutual Funds ;)

mutual-funds-basics

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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IFCI Sells over 27 lakh DVR shares of Tata Motors :)

DVr shares

IFCI has sold more than 27 lakh Differential Voting Right (DVR) shares of Tata Motors in the last two trading sessions through the bulk deal route.

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At the time of the issue of these shares in November last year, IFCI was the sub-underwriter to Tata Motors’ DVR issue, along with JM Financial.

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Of the 6.4 crore DVR shares issued by Tata Motors, IFCI held 81.96 lakh shares (12.77 per cent) as on June 30.

After the sale, IFCI’s stake has fallen to 8.4 per cent.

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Marketmen said IFCI is likely to have sold the DVRs to take advantage of the rise in the share prices.

IFCI had bought the shares at Rs 305 a piece in November last year.

😉

The Tata Motors DVR stock closed up 4.8 per cent at Rs 368.95 on the BSE.

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“IFCI purchased these shares at a lower price; this is quite a decent exit proposition. They have made fair bit of profit from this sale,” said Mr Jagannadham Thunuguntla, Head of Equities at SMC Capitals.

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Another reason for IFCI’s sale of the DVR shares in the last two trading sessions could be that they wanted to sell before the release of Tata Motors’ consolidated first quarter results on Monday, Mr Thunuguntla said.

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Company has raked in Rs 98 crore through market sales. 🙂

Tata Motors made a consolidated net loss of Rs 329 crore for the quarter ended June 30.

Tata Motors was the first company to issue shares with DVRs in India in November 2008 when it issued 6.4 crore DVR shares as part of its Rs 4,145-crore rights issue to repay the loan taken for its acquisition of Jaguar-Land Rover.

🙂


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. 🙂

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 — 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 — ie Rs 50 lakh (Rs 5 million) — 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.

🙂


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 — 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 — ie Rs 50 lakh (Rs 5 million) — 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.

WHEN TO SELL STOCK?

WHEN TO SELL 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.


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.

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 andthe 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. 🙂

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.

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).

4. Stock is Over Valued:

During bull market, high quality stocks appreciate value.

But more importantly, with so much hype around the stock, they are often set up for a fall.

Therefore, investor may use the strategy of selling them first and buy at lower price.

5. Need Some Cash-

Certain unexpected circumstances may affect the time when to sell stock. It is not wrong to sell stock to solve your financial emergency, especially the underperforming one.

However, it is advisable to have some emergency cash funds.

After all, basic investing rules is to start investing if you have enough money.

6. A Change in Monetary Policy-

The Central Bank, RBI changes monetary policy if it perceives that inflation is heating up.

By raising interest rates, it contracts the money supply and slows down the financial system.

It is generally seen that stocks normally react negatively against the action, and some time markets become more volatile.

If you are not happy with this type of risk then you should move a portion of your portfolio into stocks that will not be as affected with such changes.

7. A Company Suddenly Cuts Dividends or Lower Income Estimates-

This event should be investigated carefully before making any judgment to sell.

For good reason, the board of directors might want to retain more of their earnings for internal growth, rather than paying them out in dividends.

Sell a company’s stock if the performance is down.

Investors must never sell the stock of a fine company if its price goes either ways significantly – up or down.

Falling earnings margins and slowing earnings must be treated as a warning signal.

Lastly, I would like to say that always do your homework (Research) well while selling a company’s stock; you can useeither the top-down approach or the bottom-up approach.

Markets are often full of rumors. You cannot make money in the market by acting on market rumors.

Always listen to the stories, but remember you should do your own research–and do it thoroughly.

Make your buy or sell decision based on your analysis of the company, not on what others tell you to do.

How to make money in shares!

How to make money in 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.

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 — 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 — ie Rs 50 lakh (Rs 5 million) — 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.