Synopsis
How are individual investors different from institutional investors? Among many differences, a key one is: There’s something most individual investors don’t even look at before buying stocks, but institutional investors give due importance to. And that is the dividend yield at which the stock is being bought. For an individual investor, the focus is on possible capital gain. To an extent, there’s nothing wrong with this as stocks are mostly bought for capital gain – and not for the dividend that may come over the year. But there are times when using dividend yield as the first yardstick of investing will help you make a decision – especially when things are not very clear.
They don’t make it to the headlines because they are not managed by star fund managers. But there are many mutual fund schemes whose stated objective at the time of new fund offering (NFO) is very clear: They will focus on stocks which offer a certain dividend yield. In a bull market, these mutual funds find it difficult to find stocks. But as soon as the bears come visiting, these funds not only find opportunities but also become bottom-makers.
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