High dividend stocks for risk-averse investors
If you thought that stock markets are all about the bulls and the bears, think again! Dog stocks are a good bet to invest in, if you are among those interested in high yields, but without wanting to invest too much time on tracking stock price movements on a regular basis. Simply put, dog stocks are high dividend-yielding stocks. This can be an especially good investment avenue for risk averse investors who fear a 2008-type market crash and are worried about returns on equity investments.
The concept of dog stocks as an strategy for picking stocks is based on a 1982 concept on ‘Dogs of the Dow’, which was eventually popularised in the early 1990’s by Michael B O’ Higgins. The system urges investors to choose, once a year, 10 stocks from the benchmark US index — Dow Jones Industrial Average (DJIA) — that have the highest dividend yield — i.e, the percentage of dividend paid per share of the company divided by the scrip’s market price. The rationale behind using a high dividend yield as a filter for choosing a scrip is that the dividend and not the stock price is a true measure of a company’s worth. Companies that pay high dividends are generally seen as stable and dependable in the long run. Further, if the stock is part of any benchmark index — be it the Dow or the Sensex — it has to be fundamentally good and will weather most market crash.
The investment corpus should
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