BNP Paribas Dividend Yield Fund

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Call 0 94 8300 8300 (India)

 

This fund invests in stocks with dividend yield above 0.50 per cent and across market capitalisation. Alongside this, the fund has a value-based approach towards investments and stock selection is done on the dividend payout history or ability of the company and its growth prospects. Free cash flow too forms a key criterion.

Its average equity allocation is 92 per cent but cash allocation has varied drastically as it touched as high as 20 per cent in 2008.

 

Performance

After somewhat indifferent first 4 years, the fund finally found its feet in 2010 when it managed to marginally beat the category average and has not stumbled since then. Its core strength lies in doing well during bear phases rather than bull phases of the market. When it comes to choosing stocks for its portfolio, ONGC, HPCL, Castrol India, SBI, Indian Oil, Deepak Fertilisers, HCL and BPCL have regularly found space. Of these, only HPCL, SBI and Deepak Fertilisers have not made money for the fund. In the past 6 months, its highest holding has been in Bharti Airtel, of around 6.31 per cent, which has also made profit.

 

Since 2012, the fund's investments in chemicals have steadily increased while in engineering they have come down. However, the chemicals space hasn't given any gains since 2008, if one discounts the dividend yield.

 

During this period, FMCG turned out to be the saviour for the fund as all big gains came from this sector.

 

Like everyone else, the fund has had a bad time while selecting the small-cap stocks. From the recent portfolio of 12 small-cap stocks, 7 have turned out to be loss-making, taking the period from 2008 till May 2013 into consideration. Even the profits from the remaining five (such as Repco Finance, Vardhman Textiles, Balkrishna Ind.) do not cover the losses by the other seven.

 

Why invest?

The fund is the best bet when confronted with choppy markets, as is the case now. But its high expense ratio (2.83 per cent) might act as a deterrent to prospective investors.

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

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You can write back to us at PrajnaCapital [at] Gmail [dot] Com

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