• HDFC
• 16 Nov 2019
• Equity Product

HDFC, Tester

Investing for income

 

Many investors focus on dividends when deciding where to invest their money. The main reason for doing so is to earn a regular dividend income, aside from the capital gains. Firms, especially established ones, have a practice of periodically returning capital to their investors in the form of dividends.

 

Sending positive signals

 

Each time a company announces a dividend, it signals to the market that it’s doing well & that they have enough cash to not only continue/expand their operations but also to return some money back to their investors. It’s seen as a sign of a healthy & responsible business.

 

If the firm increases its dividend, this is taken as a very positive sign by the market - the thinking is that the company is growing & doing well enough to not only pay-out dividends but also increase it! As such, when it comes to investing to earn dividend income, identifying companies that are consistently increasing their dividends is a rewarding strategy.

 

The Dividend Aristocrats smallcase is a portfolio that consists of companies that have increased their dividends consecutively for the last 10 years. Not only does the research team identifies stocks that meet this criteria like ITC, Bajaj Finance, etc - they also create a portfolio where every stock is weighted based on various fundamental factors, including their dividend payout. Moreover, this portfolio is rebalanced every year to ensure only companies that meet the above dividend standards remain in the smallcase.

 

By investing in the Dividend Aristocrats smallcase, you aren’t just investing for dividend income - you are actually investing in diverse companies that are not only growing consistently & are operationally stable, but also sending positive signals to the market.