Top five dividend yields for this year

The stock market index will gain 18 per cent to reach 11,500 points in the second half of the year, according to Topline Securities. The index had a four per cent return during the first half of the year.

Analysts believe that despite imposition of capital gains tax the index will perform better in near future. This is despite the stock market starting the new fiscal year with very low volumes indicating uninterested investors.

Stocks with better dividend yields can be part of an investment portfolio at a time when banks and other financial institutions are offering attractive returns on term deposits, according to an analyst.

The following are the top five dividend yielding stocks for fiscal year 2011.

Hubco

Hubco is one stock which trades at attractive dividend yield of 16 per cent in fiscal year 2011, which is one of the highest dividend yields, said Farhan Mahmood in his research report.

Hubco stock is offering a 22 per cent internal rate of return. Share dividend of Rs5.4 per share for fiscal year 2011 is expected against Rs4.8 last year.

With more than 60 per cent rise in electricity rates, probability is low that circular debt will grow further, said Mahmood.

National Refinery

The National Refinery Limited is an ideal investment case for long-term investors. The scrip is available at 15 per cent dividend yield on next year’s earnings.

The stable lube earnings provide buffer to volatile fuel earnings. Besides better lube business, the company’s refinery margins have also improved in the last two quarters. The only risk is the reduction in deemed duty which is unlikely to happen in the short run, believes Mahmood.

Pakistan Oilfields

The Pakistan Oilfields Limited is expected to witness a 35 per cent earnings growth in fiscal year 2011.

Currently, POL is trading at dividend yield of eight per cent and 12 per cent respectively for fiscal year 2010 and fiscal year 2011 compared with market dividend yield of six per cent and eight per cent respectively.

The only risk factor is international oil prices, which is very limited, said Mahmood.

Fauji Fertiliser

The stock is a safe play for investment because of stable earnings and 100 per cent payout ratio. Thus, the 12 per cent dividend yield is attractive.

The only concern that has emerged in the last couple of months is the gas curtailment issue, the analyst said.

To mitigate the impact, urea prices have already increased by 20-23 per cent to around Rs925 per bag in the last six months, which are still 50 per cent lower than global prices.

Pakistan Petroleum

The Pakistan Petroleum Limited will provide a decent growth in earnings coupled with a handsome dividend return, said Mahmood.

Several development assets such as Tal, Kandhkot, Adam, Tajjal, Latif and Nashpa offer incremental upside at current levels.

This will offset the natural decline from its premier gas field Sui and yield a dividend of 11 per cent.

Published in The Express Tribune, July 16^th, 2010.