These high-dividend yield stocks look interesting bets on choppy Street

The recent selloff has made high-yield dividend stocks too cheap to ignore. NLC India, Ircon International, REC, Sonata Software, TV Today, Bajaj Consumer and PTC India are currently trading at attractive yields of between 10% and 15%.

“When you are not sure how long the correction will last, a good dividend yield will give you a steady income,” said VK Sharma, head — capital market strategy, HDFC Securities. “You treat the stock more like a fixed deposit where you get your fixed returns.”

With yields on 10-year government securities expected to slip below 6%, it makes sense to buy high-dividend yield stocks, analysts said. These companies are profitable and have very good business models that can ride out disruptions.

“One must choose stocks from the large-cap pack, as paying out dividends can restrict the growth potential of midcaps,” said Brijesh Bhatia, analyst, Dealmoney Securities.

In companies such as Coal India, Oil India, BHEL, NLC, Ircon, PTC, the government is the majority owner, and is more interested that the company pays as much dividend as possible so that New Delhi can balance its fiscal deficit better.

However, some said the stocks that give high dividend yield are not likely to be the best of investments in times of growth.

“A pure dividend yield-focused portfolio is perceived as a defensive strategy where the volatility could be relatively lower but so would be the returns as compared to a well-diversified strategy with focus on growth companies at right valuations,” said Gaurav Dua, head — capital market strategy, Sharekhan.