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Aarati Krishnan

INVESTORS may consider adding Birla Dividend Yield Plus to their portfolio through the systematic investment plan. The fund's stringent parameters for the selection of dividend yield stocks and its good track record since launch make it a good investment vehicle.

High dividend yield stocks are a suitable complement to your equity portfolio for two reasons. One, historically, investing in high dividend yield stocks has paid off well in the Indian market. Such stocks have performed better than the market in the bullish phases and lost less value in the bearish ones.

Second, a dividend yield strategy is a good way of ensuring that a part of your portfolio is always allocated to stocks with reasonable P/E multiples. Investing through the fund route makes sure that only quality stocks with a high dividend yield find a place in your portfolio.

Suitability: Birla Dividend Yield Plus is suitable for equity investors of a conservative genre. A dividend yield fund is better structured than a vanilla equity fund to pay out periodic dividends. However, even a dividend yield fund is subject to fluctuations of the equity market. Don't count on it for regular dividends.

Performance: Birla Dividend Plus has turned in an impressive return of 108 per cent since its launch in February 2003. But this performance straddles a bullish phase and the fund is yet to establish a record over a complete market cycle. However, a couple of factors enhance the comfort level for investors:

One, the fund's criteria for inclusion of stocks in its portfolio afford a reasonable margin of safety for investors. Only stocks with a dividend yield that is twice that of the Sensex basket are included in the portfolio. The fund has consistently maintained a dividend yield for its portfolio that is much higher than the stipulated level.

For instance, the average dividend yield of the stocks in the November portfolio was at 4.3 per cent compared to 1.9 per cent for the Sensex basket. The average price earnings multiple for the stocks in the November portfolio was at about seven times.

Second, though the fund is yet to experience a full-fledged bear market, it has weathered the intermittent correction phases in the market over the past year quite well.

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