What you don’t expect in a Dividend Yield Portfolio?
• A 8.5% dividend yield overall
• A return of 36% in 15 months (not including dividends)
And that is what the Capitalmind Dividend Yield portfolio has done since Jan 2016!
Here’s how the dividend yield portfolio has done:
The return since Jan 2016 is 36% (absolute returns). This does not include dividends.
If you invested approximately Rs. 121,000 in the dividend portfolio last year, you would now have Rs. 166,000, plus Rs. 10,300 in dividends.
That means your dividends itself gave you 8.5% dividend yield. (on the 121,000 invested). These dividends are tax-free in your hands.
Your return on the stock portfolio itself is 36% in 15 months or so.
The overall return, including dividends, is a whopping 44%.
Note: We had earlier exited a losing stock (Noida Toll Bridge) at a 25% loss. This has been offset by excellent performance by other stocks that we have added.
Secondary note: We haven’t considered participating in buybacks. If you participated in many of the buybacks that came about last year in these stocks, your return would be higher. For instance Coal India had a buyback at Rs. 335 between Oct 3 and Oct 18, 2016. The market price dipped to below Rs. 315 in that time. If you tendered your shares, they would be bought at 335, and you could buy the shares in the market at Rs. 315 instead. This would give you a further Rs. 20 profit on the stock (approximately 6% more). We aren’t accounting for such buyback returns in the above calculations.
How The Portfolio Works
We simply equal weighted 12 stocks and bought them in Jan 2016. Given their high yields, they still look good for a longer term purchase, equal weighted.
What you might do is to buy these stocks in an equal weighted way (same amount invested per company). We would even suggest that you build a position over the next 10 months by putting 10% each month into all stocks equally.
However, we would caution you appropriately: this is not a growth portfolio and your dividend yield going forward may fall a little given how much some companies have risen. The portfolio is expected to work in the long term. As you can see, the first six months were lousy as the portfolio under-performed the Nifty and now is doing well.
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Note: This is not portfolio advice. Consider this a very risky portfolio and proceed at your own risk. At Capitalmind Premium the reason we have a portfolio is to demonstrate our commitment to our analysis, and we track it closely. It is not meant to be a recommendation for anyone in particular, primarily because we don’t know your risk profile.
Holdings: Analyst and family do own some of the positions listed above. Please assume we are biased.