Dividends Collection is much safer Investment in volatile market.
After a runaway rally in the last calendar year, stock market in Bangladesh has finally witnessed a pause over the past few months with some volatility. After sustaining an upward momentum, the stock markets have refused to move upwards in a straight line, and are showing signs of choppiness over the past several weeks. While one of the reason why the benchmark indices have taken some profit taking over the past few weeks includes the spiraling crude oil prices and a shift in focus of investors towards precious commodities, there are some investors, still betting on stocks, which could offer healthy returns even in times, when market takes time to consolidate near current levels before a decisive breakout.
So what could be the ideal preposition for such investors, to make the best out of market, even when volatility has dampened the spirits of investors looking for a healthy return in last few weeks?
One of the ideal foils, under such volatile circumstances, could be to look for safe dividend yield options, which keep offering steady returns over a period of time. While choosing the dividend yield options, an investor needs to outline a few factors, which could be:
• For one, to select such dividend yield options, by checking out the consistency of the past few years, of the dividend paid by companies chosen. For that matter, only the companies offering uninterrupted dividend every year, usually qualify as the ideal dividend yield plays.
• Apart from same, even amongst the stocks which qualify amongst the dividend yield stories, there are outright winners, in which such companies may have even been aggressive enough to raise the dividend paid several times over the past few years, to authoritatively qualify as outright winners.
• In case of such dividend yield stories, the ideal bet should be placed on stocks, which have a strong statement in the making, with the product they offer, so as subsequently qualify as growth stories, apart from being dividend yield options.
• Investors should remember that in order to get a right mix of portfolio between growth in the portfolio and the dividend yield options, only a part of the portfolio should be allocated to the dividend options, rather than entirely betting on them. Any such move could hamper the chances of getting a healthy return out of aggressive portfolio.
• Also, investors opting for dividend yield should not frequently get into the habit of shuffling their selection of dividend yield options and remain put with the same as a strategic part of portfolio as defensive stocks.
• Such types of companies should do well during inflationary economic conditions, as they would be able to pass cost increases over the consumers, who demand that specific product type. The rising dividend would also provide investors with an inflation adjusted stream of income, which would maintain and grow its purchasing power over time.
• Investors should be selective enough to not to overpay for them. The lost decade for stocks was caused exactly because investors bid up stock prices to high levels.