What is Dividend Yield ?

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For the uninitiated, dividend yield can be calculated by dividing the dividend per share by the prevailing price of the stock. In a bad market, dividend yield goes up as the stock prices fall, making such an attractive bet. The fund manager tries to cash in on the opportunity to buy under-priced stocks. Fund managers can buy a stock when it is cheap on the dividend yield basis and can sell it as it turns dear if dividend yield falls with rising prices, thus capturing profits for investors. Such a fund will have companies with sound financials and consistent dividend paying record. That means, apart of the regular dividends, you can also be reasonably sure of the capital appreciation over the long-run. Sure, if you have the stock picking skills, you can replicate the same strategy to build your own portfolio. Otherwise, stick to a good mutual fund scheme.

A word caution for those who are going to do it on their own. Don't just pick up any stock that has recently declared dividend and has attractive dividend yield. This is because some companies may announce special dividend to distribute a one-time gain to investors or for achieving a milestone like golden jubilee year or sales of $1 billion. For example, Gujarat Gas recently declared a special dividend of . 12, and Bosch paid a special dividend of . 85 in June 2011. So when you are calculating dividend yield, don't forget to exclude such special dividends. One can choose to invest in stocks quoting at or above, say, an absolute number of 3% or use a relative yardstick such as dividend yield of the Sensex. Also, look into the business growth of the company. Remember, you are buying stocks to create wealth and not just to earn regular income in the form of dividend year after year.

 

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Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

 

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

 

Download Tax Saving Mutual Fund Application Forms from all AMCs

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These Application Forms can be used for buying regular mutual funds also

 

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

1. HDFC TaxSaver
2. ICICI Prudential Tax Plan
3. DSP BlackRock Tax Saver Fund
4. Birla Sun Life Tax Relief '96
5. Reliance Tax Saver (ELSS) Fund
6. IDFC Tax Advantage (ELSS) Fund
7. SBI Magnum Tax Gain Scheme 1993
8. Sundaram Tax Saver

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