ROUND NO. 6 - DIVIDEND YIELD
Most of time you keep hearing that high dividend yield stocks don't fall much in a crash. 2008 proved that the above line is mostly rubbish. However, a good dividend yield is a very important parameter.
- In large (in value terms, not number of stocks) portfolios, dividend from stocks is enough to take care of expenses. One doesn't need to sell stocks.
- A company which has grown its bottomline at a decent pace trading at a price offering a largish dividend yield (Eg: Hawkins, Ador Fontech etc) could signify a significant near term upside in the stock price.
| Company Name |
Div Yield in % |
Points Earned |
| Hawkins Cookers |
3.71 |
11 |
| Blue Star |
1.78 |
10 |
| Page Industries |
1.61 |
9 |
| Voltamp Transformers |
1.38 |
8 |
| HDFC |
1.2 |
7 |
| Voltas |
0.97 |
6 |
| Thermax |
0.67 |
5 |
| Zydus Wellness |
0.52 |
4 |
| Titan Industries |
0.5 |
3 |
| HDFC Bank |
0.48 |
2 |
| Yes Bank |
0.47 |
1 |
ROUND NO. 7 - LAST 4 YEARS DIVIDEND PER SHARE CAGR
If a company is growing at 30% CAGR, there is a possibility of the stock price going nowhere - it automatically does not guarantee a large appreciation in stock price. But if a company is growing at 30% CAGR and if the dividend per share is growing at 30% CAGR, then there is a 100% guarantee that the stock price will appreciate (at almost a similar pace, but not exactly).
Because, if the stock price doesn't appreciate, and if the dividends keep rising, then the stock will soon be available at a dividend yield of 20%! Markets won't allow that to happen (Eg: hawkins).
| Company Name |
Dividend/share CAGR in % |
Points Earned |
| Voltamp Transformers |
123.61 |
11 |
| Page Industries |
68.75 |
10 |
| Hawkins Cookers |
68.18 |
9 |
| Titan Industries |
49.53 |
8 |
| Blue Star |
35.12 |
7 |
| Voltas |
35.12 |
6 |
| Zydus Wellness |
31.61 |
5 |
| HDFC Bank |
21.54 |
4 |
| HDFC |
15.83 |
3 |
| Thermax |
10.12 |
2 |
| Yes Bank |
0 |
1 |
ROUND NO. 8 - DIVIDEND PAYOUT RATIO
Dividend payout ratio is the percentage of profits that is paid out as dividends. That is, if a company has a profit of Rs. 100 cr and it paid out Rs. 30 cr as dividends, then its dividend payout ratio is 30%
Why look at this parameter? Simple. You will NEVER have a Satyam, Pyramid Saimira, Asian Electronics, HFCL or a Compact Disc in your portfolio if you invest in stocks which payout 15% plus of their profits as dividends.
Plus, a company that pays out a large percentage of profits as dividends but still manages to grow its profits without taking on debt is a sign of an excellent company. That's why in the next round, we consider the debt/equity ratio too in our analysis.
| Company Name |
Dividend Payout Ratio in % |
Points Earned |
| Page Industries |
69.18 |
11 |
| Hawkins Cookers |
68.95 |
10 |
| Thermax |
49.12 |
9 |
| HDFC |
42.64 |
8 |
| Blue Star |
39.87 |
7 |
| Titan Industries |
31.01 |
6 |
| Zydus Wellness |
30.19 |
5 |
| Voltas |
22.41 |
4 |
| HDFC Bank |
21.72 |
3 |
| Voltamp Transformers |
17.86 |
2 |
| Yes Bank |
12.47 |
1 |
Tallying the scores -
| Company Name |
RoE (Pts) |
P/E (Pts) |
Market Cap (Pts) |
Sales Growth (Pts) |
Profit Growth (Pts) |
Div Yield (Pts) |
DPS Growth (Pts) |
Div Payout Ratio (Pts) |
Total Pts |
| Hawkins Cookers |
11 |
10 |
11 |
2 |
10 |
11 |
9 |
10 |
74 |
| Page Industries |
8 |
6 |
9 |
8 |
3 |
9 |
10 |
11 |
64 |
| Blue Star |
9 |
8 |
7 |
4 |
7 |
10 |
7 |
7 |
59 |
| Zydus Wellness |
10 |
3 |
8 |
10 |
11 |
4 |
5 |
5 |
56 |
| Voltamp Transformers |
5 |
11 |
10 |
1 |
6 |
8 |
11 |
2 |
54 |
| Voltas |
7 |
9 |
6 |
5 |
8 |
6 |
6 |
4 |
51 |
| Titan Industries |
6 |
2 |
3 |
7 |
4 |
3 |
8 |
6 |
39 |
| HDFC |
4 |
5 |
2 |
6 |
2 |
7 |
3 |
8 |
37 |
| Yes Bank |
3 |
7 |
4 |
11 |
9 |
1 |
1 |
1 |
37 |
| HDFC Bank |
2 |
4 |
1 |
9 |
5 |
2 |
4 |
3 |
30 |
| Thermax |
1 |
1 |
5 |
3 |
1 |
5 |
2 |
9 |
27 |
And so finally, this is the ranking of companies which offer the best compromise between low P/E, market cap and high RoE, sales/profit/dividend growth, dividend yield & payout ratio.
| Company Name |
Ranking |
| Hawkins Cookers |
1 |
| Page Industries |
2 |
| Blue Star |
3 |
| Zydus Wellness |
4 |
| Voltamp Transformers |
5 |
| Voltas |
6 |
| Titan Industries |
7 |
| HDFC |
8 |
| Yes Bank |
9 |
| HDFC Bank |
9 |
| Thermax |
11 |
ANALYSIS:
- If you haven't noticed, Yes Bank paid out their maiden dividend in FY10.
- Although Thermax suffered a large loss (extra ordinary item) in 4QFY10, they still paid out 49% of their profits are dividends. One can read a lot into little moves like this.
Edited by smartcat - 15/Aug/2010 at 1:53am
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. I intend to keep this a mathematical analysis which a software should be able to do. 
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Positive change of fatherhood. 
