How to use the MSCI high yield dividend methodology for Indian stocks

The MSCI high dividend yield methodology can be used to create a high dividend yield portfolio of Indian stocks. Here is a simple way to do it.

1. Choose an index. eg. S&P CNX Nifty. You can use indexes with larger number of companies, like S&P CNX 500, S&P CNX Midcap etc.

2. Exclude all REITs as they usually have high dividend yield because the structure of the company is like that.

3. Exclude companies with zero payout as they do not pay dividends.

4. Exclude companies with negative payout ratio as they have negative earnings(loss) and hence future dividend payments are at risk.

5. Exclude companies with the highest payout ratio, defined as top 5% of the companies with positive payout ratio. So if you have 50 companies as in the S&P CNX nifty which have a positive payout ratio, the top 5% will be 5/100 x 50=2.5 companies=3 companies( to round to nearest whole number).

7. Only securities with a dividend yield of greater than or equal to 1.3 times the dividend yield of the parent index is then included.

8. Repeat this process every 6 months or one year. If a security is already an index constituent it will remain in the index until it reaches the top 2% of companies with positive payout. It will remain as long as the dividend yield is greater than the parent index yield. If a company goes out of the parent index it is deleted from the High yield index simultaneously. If a company is included in the parent index it is considered for inclusion only in the next 6 month review.

The current list of companies that will make the grade from the S&P CNX 500 are as follows:

Company Name PRICE Dividend Yield Price-Earnings Ratio Earnings Dividends Payout ratio
UCO Bank 75.1 6.85 4.24 17.71226 5.14435 0.29044
PSL 62.25 6.41 6.11 10.18822 3.990225 0.391651
Indiabulls Fin. 207.55 6.25 8.79 23.61206 12.97188 0.549375
SRF 227.1 6.23 3.99 56.91729 14.14833 0.248577
I O B 75.7 5.94 5.59 13.54204 4.49658 0.332046
GHCL 37.2 5.38 3.73 9.97319 2.00136 0.200674
Varun Ship. Co. 14.93 5.36 1.83 8.15847 0.800248 0.098088
Andhra Bank 105.05 5.24 4.45 23.60674 5.50462 0.23318
NIIT 31 5.16 12.86 2.410575 1.5996 0.663576
REI Agro 10.2 5.07 6.62 1.540785 0.51714 0.335634
Sona Koyo Steer. 12.84 5.06 6.87 1.868996 0.649704 0.347622
Corporation Bank 407.3 5.03 3.96 102.8535 20.48719 0.199188
S Kumars Nation 19.95 5.01 3.39 5.884956 0.999495 0.169839
Finolex Inds. 60.2 4.98 16.72 3.600478 2.99796 0.832656
Balmer Lawrie 568.75 4.92 6.68 85.14222 27.9825 0.328656
Indo Rama Synth. 20.5 4.88 2.28 8.991228 1.0004 0.111264
Tata Inv.Corpn. 440.35 4.77 14.52 30.32713 21.0047 0.692604
Lak. Vilas Bank 73.95 4.73 6.7 11.03731 3.497835 0.31691
Indrapr.Medical 33.9 4.72 11.04 3.070652 1.60008 0.521088
K C P 32.3 4.64 6.81 4.743025 1.49872 0.315984
Vijaya Bank 54.4 4.6 4.35 12.50575 2.5024 0.2001
Rolta India 77.2 4.54 3.8 20.31579 3.50488 0.17252
Aarti Inds. 77.3 4.45 6.5 11.89231 3.43985 0.28925
Ashok Leyland 23.05 4.34 11.24 2.050712 1.00037 0.487816
Banco Products 58.7 4.26 6.81 8.619677 2.50062 0.290106
G N F C 82.7 4.23 4.67 17.70878 3.49821 0.197541
Allahabad Bank 142.15 4.22 3.62 39.26796 5.99873 0.152764
Aptech 71.35 4.21 17.93 3.979364 3.003835 0.754853
Graphite India 83.95 4.17 7.6 11.04605 3.500715 0.31692
Deepak Fert. 132.25 4.16 6 22.04167 5.5016 0.2496
Union Bank (I) 194.55 4.11 5.84 33.31336 7.996005 0.240024
Noida Tollbridg. 24.6 4.07 10.21 2.409403 1.00122 0.415547
Torrent Power 159.95 4.06 7.61 21.0184 6.49397 0.308966
Indian Bank 186.5 4.02 4.58 40.72052 7.4973 0.184116
Oil India 476.45 3.99 8.12 58.67611 19.01036 0.323988
St Bk of Bikaner 367.1 3.95 3.72 98.6828 14.50045 0.14694
Karnataka Bank 90.5 3.87 6.09 14.86043 3.50235 0.235683
Jagran Prakashan 90.85 3.85 15.48 5.868863 3.497725 0.59598
VST Inds. 1703.35 3.82 18.95 89.88654 65.06797 0.72389
NHPC Ltd 18.6 3.76 8.65 2.150289 0.69936 0.32524
Syndicate Bank 102.65 3.7 4.38 23.43607 3.79805 0.16206
Guj Inds. Power 67.9 3.68 7.48 9.07754 2.49872 0.275264
J & K Bank 922.35 3.63 5.16 178.75 33.48131 0.187308
First Leasing 50.3 3.58 3.69 13.63144 1.80074 0.132102
S B T 505.5 3.56 4.57 110.6127 17.9958 0.162692
O N G C 281.3 3.47 9.58 29.36326 9.76111 0.332426
Neyveli Lignite 81.4 3.44 10.16 8.011811 2.80016 0.349504
Geojit BNP 21.95 3.42 12.13 1.809563 0.75069 0.414846
Rural Elec.Corp. 219.45 3.42 7.15 30.69231 7.50519 0.24453
Karur Vysya Bank 415.3 3.37 8.38 49.55847 13.99561 0.282406
Esab India 450.35 3.33 18.37 24.51551 14.99666 0.611721
Bajaj Holdings 760.1 3.29 15.08 50.40451 25.00729 0.496132
Sundram Fasten. 42.55 3.29 8.21 5.182704 1.399895 0.270109
Praj Inds. 48.25 3.27 13.67 3.529627 1.577775 0.447009
Greaves Cotton 68.9 3.19 11.45 6.017467 2.19791 0.365255
Polaris Finan. 140.8 3.19 7.21 19.52843 4.49152 0.229999
Tata Chemicals 315.15 3.17 12.35 25.51822 9.990255 0.391495
TVS Motor Co. 41.65 3.12 8.2 5.079268 1.29948 0.25584
IFCI 32.05 3.12 3.78 8.478836 0.99996 0.117936
IDBI Bank 98.15 3.1 5.91 16.60745 3.04265 0.18321
Swaraj Engines 420.15 3.09 9.85 42.65482 12.98264 0.304365
Tata Elxsi 227.55 3.08 18.31 12.42764 7.00854 0.563948
Hexaware Tech. 129.1 3.07 12.99 9.938414 3.96337 0.398793
Power Fin.Corpn. 195.4 3.07 7.78 25.11568 5.99878 0.238846
Monsanto India 656.3 3.05 20.67 31.75133 20.01715 0.630435
Tata Steel 404.9 2.96 6.74 60.07418 11.98504 0.199504
Guj NRE Coke 17.05 2.93 24.36 0.699918 0.499565 0.713748
Dena Bank 102.35 2.93 4.1 24.96341 2.998855 0.12013
Sun TV Network 329.9 2.88 19.36 17.04029 9.50112 0.557568
Peninsula Land 38.6 2.85 7.24 5.331492 1.1001 0.20634
B H E L 225 2.84 7.71 29.18288 6.39 0.218964
Sh.Renuka Sugar 35.35 2.83 27.83 1.270212 1.000405 0.787589
Orient Paper 69.1 2.81 7.02 9.843305 1.94171 0.197262
Canara Bank 393.5 2.8 5.23 75.23901 11.018 0.14644
Brigade Enterpr. 53.75 2.79 13.17 4.081245 1.499625 0.367443
Central Bank 71.75 2.79 9.87 7.269504 2.001825 0.275373
Birla Corpn. 214.8 2.79 7.8 27.53846 5.99292 0.21762
Can Fin Homes 107.25 2.79 4.35 24.65517 2.992275 0.121365
Oriental Bank 287.35 2.75 7.11 40.41491 7.902125 0.195525
Guj. Ambuja Exp 21.8 2.75 4.93 4.421907 0.5995 0.135575
Karuturi Global 3.63 2.74 22.69 0.159982 0.099462 0.621706
Punjab Natl.Bank 803.15 2.74 5.42 148.1827 22.00631 0.148508
Jyoti Structures 40.35 2.73 3.92 10.29337 1.101555 0.107016
Automotive Axles 371 2.7 9.91 37.43693 10.017 0.26757
Tulip Telecom 59.9 2.67 2.97 20.16835 1.59933 0.079299
Coal India 376.2 2.66 29.34 12.82209 10.00692 0.780444
Orchid Chemicals 114.45 2.65 18.28 6.260941 3.032925 0.48442
Chambal Fert. 71.6 2.65 11.44 6.258741 1.8974 0.30316
Tata Sponge Iron 307.75 2.6 5.17 59.52611 8.0015 0.13442
Bajaj Auto 1748.2 2.57 16.26 107.5154 44.92874 0.417882
Engineers India 234.65 2.56 12.3 19.07724 6.00704 0.31488
Navneet Publicat 54.95 2.55 13.88 3.958934 1.401225 0.35394
Castrol India 295.1 2.54 32.75 9.010687 7.49554 0.83185
BGR Energy Sys. 275.9 2.54 9.62 28.67983 7.00786 0.244348
Supreme Petroch. 55.45 2.53 18.36 3.020153 1.402885 0.464508
R C F 55.4 2.53 12.15 4.559671 1.40162 0.307395
Coromandel Inter 277.65 2.52 11.43 24.29134 6.99678 0.288036
Lak. Mach. Works 2008.4 2.49 17.84 112.5785 50.00916 0.444216
Zensar Tech. 279.95 2.49 10.06 27.82803 6.970755 0.250494
India Infoline 60.45 2.48 25.72 2.350311 1.49916 0.637856
PTC India 61.05 2.46 18.28 3.339716 1.50183 0.449688
HEG 204.35 2.45 4.02 50.83333 5.006575 0.09849
Alok Inds. 12.23 2.45 1.56 7.839744 0.299635 0.03822
ALSTOM India 379.85 2.42 15.93 23.84495 9.19237 0.385506
Muthoot Finance 166.2 2.41 6.52 25.4908 4.00542 0.157132
NTPC 166.45 2.4 14.23 11.69712 3.9948 0.34152
HSIL 124.95 2.4 8.27 15.10883 2.9988 0.19848
Escorts 62.7 2.39 10.48 5.982824 1.49853 0.250472
Guj Alkalies 126.45 2.37 5.71 22.14536 2.996865 0.135327
Bank of India 296.2 2.37 5.58 53.08244 7.01994 0.132246
India Cements 84.9 2.36 9.82 8.645621 2.00364 0.231752
NMDC 191.5 2.35 10.25 18.68293 4.50025 0.240875
Hero Motocorp 1924.55 2.34 15.78 121.9613 45.03447 0.369252
Man Infra 194.7 2.31 14.33 13.58688 4.49757 0.331023
Nava Bharat Vent 163.65 2.31 7.52 21.76197 3.780315 0.173712
Cummins India 480.45 2.29 22.4 21.44866 11.00231 0.51296
FDC 87.8 2.28 11.55 7.601732 2.00184 0.26334
Opto Circuits 131.95 2.27 13.26 9.95098 2.995265 0.301002
Sesa Goa 175.85 2.27 11.86 14.82715 3.991795 0.269222
Bank of Baroda 745.4 2.27 5.99 124.4407 16.92058 0.135973
Unity Infra. 44.05 2.27 3.2 13.76563 0.999935 0.07264
S A I L 88.3 2.26 9.72 9.084362 1.99558 0.219672
South Ind.Bank 22.55 2.26 6.81 3.311307 0.50963 0.153906
Glaxosmit Pharma 1999.85 2.25 26.07 76.71078 44.99663 0.586575
Akzo Nobel 887.15 2.25 21.86 40.58326 19.96088 0.49185
GAIL (India) 387.9 2.24 12.94 29.97682 8.68896 0.289856
JK Tyre & Indust 112.15 2.23 6.1 18.38525 2.500945 0.13603
TajGVK Hotels 67.65 2.22 20.13 3.360656 1.50183 0.446886
Supreme Inds. 281.9 2.13 15.82 17.81922 6.00447 0.336966
eClerx Services 813.7 2.13 14.41 56.46773 17.33181 0.306933
Federal Bank 428.45 2.1 8.93 47.97872 8.99745 0.18753
Ramco Inds. 52.6 2.09 7.13 7.377279 1.09934 0.149017
Colgate-Palm. 1202.35 2.08 34.81 34.54036 25.00888 0.724048
ACC 1368.4 2.05 16.61 82.38411 28.0522 0.340505
Essel Propack 31.85 2.05 9.13 3.488499 0.652925 0.187165
SREI Infra. Fin. 24.5 2.04 36.03 0.679989 0.4998 0.735012
Jaypee Infratec. 49.25 2.03 5.42 9.086716 0.999775 0.110026
Uflex 98.95 2.02 4.72 20.96398 1.99879 0.095344
Reliance Capital 374.35 2 23.66 15.82206 7.487 0.4732
G S F C 374.75 2 3.85 97.33766 7.495 0.077
Finolex Cables 40.3 1.99 4.39 9.179954 0.80197 0.087361
Sterlite Inds. 101.9 1.96 22.69 4.490965 1.99724 0.444724
K E C Intl. 61.1 1.96 12.39 4.931396 1.19756 0.242844
United Phosp. 129.9 1.95 26.51 4.900038 2.53305 0.516945
Prakash Inds. 51.3 1.95 2.68 19.14179 1.00035 0.05226
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