DIVIDEND INVESTING: The professional way

Four fund managers reveal how they approach dividend investing

With this month's issue focusing on dividend investing, we thought it would be a great opportunity to find out how professional fund managers look at investing for dividends.

We spoke with the fund managers of four dividend funds and asked them two questions. In the pages that follow, you won't find the full questions repeated but just the short headings, as given in the brackets below.

• How do you approach dividend investing, and what are the important factors to consider? (Headline: Approach to dividend investing) 
• What are the common traps that investors should be wary of when investing for dividends? (Headline: Common traps to avoid)

Combined, these four funds manage about ₹8,400 crore (as of March 17, 2023). Together with the cover story, these interviews will tell you everything you need to know on how to approach dividend investing.

'Earning growth is an important input'

AMIT PREMCHANDANI
Senior Vice President & Fund Manager, UTI AMC

Approach to dividend investing
Our approach to this theme is to consider companies that have demonstrated the ability and willingness to distribute a significant part of the profits to shareholders, either in the form of dividends or buybacks.

We use a cutoff dividend yield (including buyback) to filter the vast set of listed companies into our investible universe. In a few cases, we focus on expected dividend yield after considering the history as well as management commentary on payouts and look through the current dividend yield of the stock, which may be low due to extraordinary circumstances. Post applying these filters, we select stocks within our investible universe based on our comfort on valuation, earnings growth, and governance across sectors.