Thoughts on dividend yielding stocks in India

By Bala | Bala | 8 Jan 2024

People say that stock market investment is a risky investment as the market may not behave the same all the time and it may not be the same all the time. For example, when we would like to buy some stocks, the value of the stocks would be at the peak and when we have a financial need, we will not have the guts to sell the stocks and book some profits. This is where we come up with some plans to make alternative investments in the stock market.

Instead of buying or trading in the stock markets, it can be a good idea to invest in stocks that yield dividends. People prefer a few methods where they either invest in dividend-yielding stocks or straight away to go mutual funds. These two are considered a little safe compared to the other investments. Index trading is also a good thing where people can just invest in the index and reap their profits after a few years because mostly the index trend will always be upward.



Some wise investments

A few years back some wise people around me showed some directions to invest in some of the dividend-yielding stocks in the share market. One such stock was REC. This had a huge demand back them because many people believed that this stock gave close to 15 or 18 percent dividends in a year. One good thing about dividends in India is that it is taxed only at 10% which is the lowest bracket compared to the other investments. There are a few people who just live with their dividend earnings alone.

I remember discussing with one of the old folks a few years back. He used to tell me that it is safe to invest in some solid stocks that wouldn't have any big price movement but ultimately the dividend we get from those stocks would be very big. One such stock is REC because in the last 5 years, they have given a lot of dividends and in addition to that they also gave a 33 percent bonus to the stockholders making my holdings bigger. With bigger holdings, we will be able to get bigger income.

Mutual fund or dividend-yielding stocks

I would still prefer having both because there are both advantages and disadvantages to both types of investments. When it comes to dividend-yielding stocks, we cannot rely completely on all the stocks. Based on the condition of the market the stock might fall big time even though they give a decent dividend. This way we may have to hold them for the long term to see a good amount of profits.

When it comes to mutual funds, it is safe in another way where the value would keep going up and at the same time even if the market is bad, there is a high chance that the value in mutual funds would still stay green. The main reason is because the person managing the stocks inside mutual funds would be responding to the market movements then and there making a good move on the stocks inside them. This way even if the market is down, the portfolio value might be up.

To wrap up, I would say it is good to have different streams of income coming to us from the share market itself but having dividend-yielding stocks should be a focus for us.

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