300 by average free-float market capitalisation and aggregate turnover for the last six months. These firms chosen from 24 sectors, including ACC Ltd, Hero Moto Corp and NTPC Ltd, are also amongst the top 50 ranked by annual dividend yield. The index has given an absolute return of 17.3 per cent and 48.4 per cent for one year and three years, respectively.
Apart from having a direct exposure to equity, investors can also choose to go in for mutual funds that invest in a basket of dog stocks. Typically known as Dividend Yield Funds, there are seven mutual funds that currently offer this option and have a combined corpus of R 4,000 crore. Though dividend yield funds were originally launched about a decade ago, they have done especially well and largely outperformed the markets since the 2008 stock market crash. These are a good option for new investors in equity markets who may lack the experience as well as the expertise to pick up dog stocks on their own.
Dhirendra Kumar, CEO, Value Research said, “Dividend yield is a good filter. Such funds they have done well in turbulent times, but they tend to get left behind in good times.” A word of caution for investors, however: If you are looking for quick returns when the markets are booming, this is certainly not an investment option for you. Dividend yield stocks and funds tend to not do as well as other equity options when the markets are on an upswing. But in the long run, or when the markets are on the downturn, these are steady performers. As Kumar pointed out, “These stocks live up to the term ‘dog’ quite literally. They work, but they can also prove to be a test of patience!”