Go for good Dividend Yield stocks in these turbulent times

Even as the European Union has approved an Euro 85 billion rescue package for Ireland which, if drawn down in its entirely, would attract an average interest rate of 5.83 per cent and rumors about QE3 floating around the scary global corridors, the Sensex rested today at 19691.78, down by 182.89 points. OK, that’s great but Mr.Market can trick the brainest guys on the street – stocks may continue to rise for the next few days and consequently simple folks may again jump in and start grabbing the shares which are in an uptrend only to see these same shares being hammered again by the “ fat boys” or “bad boys” and that’s what volatility is all about – exciting but dangerous. So, what do you do?

To my mind, in such times, a safer bet would be to go for stocks which have a pretty good dividend yield backed by a good business model. When we talk of dividends, you would be dead wrong if you go for a company that pays say a dividend of 200 to 300 per cent just in order to see a bigger dividend cheque flowing into your bank account. For instance, SBI declared a dividend of 300 per cent or Rs.30 per share for fiscal 2009-10 but at todays CMP of Rs.2747.15, the Dividend Yield works out to just 1.09 which is indeed very low compared to such yields of other companies. When we talk of Dividend Yield we are not talking of how robust a bank is or how a company like Biocon can be a great winner if it comes out with a cancer destruction miracle molecule but in simple terms we are trying to find out which companies pay good dividend compared to the market price of the share. I have short listed two companies which to my mind present a decent and safe bet in these volatile times. Here we go :

Name of Company	CMP	BV	FV	P/BV	PE	Debt Equity	Dividend
	Rs.	Rs.	Rs.			Ratio	Yield %
ANDHRA SUGARS	106.1	143	10	0.74	5.91	0.74	4.71
GHCL	43.35	125	10	0.34	2.87	1.1	4.61

Both the above two companies have a reasonably good business model and have the potential to give reasonably good capital returns by way of share price appreciation in the medium to long term.

At best, you can pick up the above two shares when the market corrects by another 10-15 per cent in which case you may get these shares much cheaper as a result of which the Dividend Yield will shoot up and cheer you up further.

Kishor S. Khot, [Kishor@hbjcapital.com], Equity Strategist, HBJ Capital Services Pvt Ltd