Let your investments reach the stars

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You’ve already checked out the Dividend Aristocrats smallcase, which invests in companies with consistently increasing dividends!

This smallcase consists of companies from the Top 700 market cap stocks that have increased their dividend payout consecutively for the last 10 years. The smallcase has 80% allocation towards Large cap companies.

But it’s time to level up your investment portfolio

For long-term investors, dividend returns are very important as they are an additional income that is earned over and above the capital gains earned by holding onto the stock.

Stock returns consist of two parts- price return and dividend return. An investor can earn back a significant portion of the investment in the form of dividends, before selling the stock.

And that’s why, we bring to you Dividend Stars.

Dividend Stars smallcase by Windmill Capital

  • This smallcase consists of companies that have maintained an average dividend yield of at least 2% over the previous 5 years
  • Only the companies that have not cut dividends for the last 5 years are included
  • The smallcase has 70% allocation towards Small cap & Mid cap companies

What’s the idea behind Dividend Stars?

The idea behind Dividend Stars smallcase was to give investors a convenient way to invest in companies that have not cut dividends in the past years and have a high dividend yield. Dividend yield refers to the amount of dividends a company is paying relative to its share price.

Let’s understand how we screen the stocks in this smallcase:

  1. Market cap of companies – All publicly traded companies on the National Stock Exchange of India, covering 90% market capitalization, are considered in the stock screening process. Since this smallcase incorporates stocks with at least 2% dividend yield, the portfolio tends to have a higher proportion of small-cap stocks as those are usually priced lower.
  2. Dividend growth – Since dividend yield is a function of current share price, it doesn’t capture the entire picture of dividend payouts over the years. That’s why in Dividend Stars smallcase, consistent growth in dividends is also an important criteria for stock selection.
  3. Dividend yield – Dividend Stars smallcase consists of companies that have maintained an average of at least 2% dividend yield in the past 5 years.

Who should invest in Dividend Stars?

Anyone who is looking for an extra cushion in the form of dividends can consider this smallcase.

In a nutshell, we can say that companies that provide regular dividend payouts and dividend growth tend to have a stable business model and endure economic cycles better.

Additionally, we understand that sometimes both unexpected external/internal factors can also affect the company’s ability to pay dividends. Hence, we evaluate the stocks in this smallcase annually to check if their dividend payouts are aligned to the criteria that we have laid out above.

However, investors need to consider the fact that pure equity smallcases with a concentration of mid and smallcap stocks has a significant risk in the short term and is only suitable for long-term investors with a higher risk appetite.

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Windmill Capital is a SEBI Registered (SEBI Registration No. INH200007645) Research Analyst Firm. The research and reports express our opinions which we have based upon generally available public information, field research, inferences and deductions through are due diligence and analytical process. To the best of our ability and belief, all information contained here is accurate and reliable, and has been obtained from public sources we believe to be accurate and reliable. We make no representation, express or implied, as to the accuracy, timeliness, or completeness of any such information or with regard to the results obtained from its use. This report does not represent an investment advice or a recommendation or a solicitation to buy any securities.

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Let your investments reach the stars