Soaring inflation, rising interest rates, heavy selling of Indian stocks by foreign institutional investors and the spectre of recession in the US. Right now, things seem uncertain and a losing option for investors. Plus it’s tempting to avoid stocks for fear of losing hard-earned cash to the volatile whims of the stock market. However, I believe there are decent investment opportunities out there with an eventual stock market recovery in the near future. Investors are confused as they have not made any money from their portfolio since the start of the calendar year, but there’s one thing we believe investors should avoid doing at all costs…and that’s doing nothing. General trajectory has been downwards and nobody knows how long this will last. However, history can be a useful guide for the future as stock markets are cyclical. Inflation which is high now should ultimately come down if central banks around the world succeed in taming down the beast. Therefore, a sensible dividend yield strategy can have a huge effect on investment portfolio returns. Similarly, geopolitical events, like the war in Ukraine are currently causing uncertainty among traders, but they will ultimately evolve. After all, stock markets the world over eventually recovered post-Covid.
Every investor should have two essential qualities— patience and identifying good investment opportunities. The first requires a long term mindset focusing on future returns over years rather than tomorrow, while the second requires insight and dedicated research. In my view, heavy selling across countless shares makes now a great time to invest—before the stock market recovery. Personally, I am capitalising in this downturn and using this opportunity to buy high dividend yield stocks. It is also a good way to accumulate your favourite stock at this point of time through the staggered route. Typically most big and well-established companies give dividends to their shareholders every year through an interim dividend and final dividend. Dividends are not an obligation but a reward. If you’re holding a stock of these companies and the company announces a dividend, then you’re eligible to receive the dividends being a shareholder on the record date. Rural Electrification Corporation Ltd or REC is a government-owned financier of public infrastructure. It has the highest dividend yield of 13.8 per cent. On the face value of Rs 10 per equity share, REC has paid out a total dividend of Rs 15.30 in the FY2022. As a result, REC has paid out 153% of its dividend throughout the fiscal year. With a book value of 146 and the stock quoting at Rs 125, the dividend yield comes to a whopping over 12% return. The company has also recently announced that it is proposing to issue bonus shares to its shareholders. The REC stock can be accumulated by investors for smart gains over the next investment period of 18 months with handsome dividend income, free bonus shares and decent capital appreciation.

Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.