Value creators for turbulent times

The only thing that gives me pleasure is to see my dividend coming in”, said John D Rockefeller, American oil magnate and philanthropist. This view seems more apt than anything else in the current volatile market. In normal market conditions, average investors would prefer to invest in those stocks that give them good capital appreciation over a period of time. The current conditions, though, can be described as anything but normal. Once again, fears of a global recession are looming large, and this is reflected in the equity market’s performance. The Indian equity market is down by 20 per cent Year-to-Date (YTD), and this is also true for most of the world – most equity markets around the world have shown negative returns during this period as well.

So, what are the options that one could look at in such times? Well, fixed income securities would logically figure high on the list of most investors when interest rates are rising and equity markets are falling. However, traditional wisdom has it that equity is the best asset class, and offers a good capital appreciation opportunity over a longer period of time.

Consider this. What if you were helped to build a portfolio consisting of stocks that offer you the best of both worlds – capital appreciation as well as steady periodic income in the form of dividends – in such volatile times? After all, isn’t successful equity investing about creating long-term wealth, rather than just benefiting from the good times?�

We, at DSIJ, have tried our best to put together a quick list of ‘best of both worlds’ for the benefit of our readers. Certain companies not only provide fixed returns in the form of dividends, but also have a scope of good capital appreciation. This recommendation, of course, comes with the universal caveat that ‘past performance is no guarantee of future results’. Nevertheless, we have tried to weed out those companies which we feel are not likely to perform well in future.

While we started out with a list of 222 companies (please see  Methodology for details of how we have arrived at the list), we have shortlisted 11 companies after applying other financial parameters like dividend coverage ratio, debt equity ratio and so on. The list is largely dominated by finance companies, which include banks, both from the private and the public sectors. At a distant second comes the pharmaceutical sector, followed by FMCG and IT-ITES companies.

Conclusion:

Certain well-known companies are conspicuous by their absence in this list, despite the fact that they pay high dividends per share. This is either due to higher share prices and hence low yield, or on account of inconsistency in their dividend payments. However, we are also providing a list of the top 50 companies that dole out highest dividend (in rupees) for our readers’ information.

With respect to our original list of companies, we suggest that our readers invest in the stocks in a staggered manner, and expect stable returns in the coming years.

The total shareholder returns for Aegis Logistics (Aegis) stands at a 95 per cent. This means that if an individual had invested Rs 100 in this company in the year 2006 and was still holding on to the scrip, then the value would have been Rs 195 as of today. Aegis provides total supply chain management services to the Indian petroleum industry. It also has presence in the Auto LPG (ALPG) retailing business. The company has a presence across eight states in the western and southern regions of India. It has played a pioneering role in the development of an extensive retail network of Auto LPG stations in India under the brand name Aegis Autogas. The company operates in two segments, logistics and gas. 97 per cent of its revenues are derived from the gas segment, while the rest comes from logistics. Aegis owns and operates a fully-refrigerated 20000 MT LPG import terminal.