BNP Paribas Dividend Yield: For conservative investors

BNP Paribas Dividend Yield is an equity diversified fund with an objective to generate long term capital growth by investing in equity and equity related securities, primarily being high dividend yield stocks. According to financial advisor, Arnav Pandya, investors with play safe attitude can look towards investing in this fund with a time horizon of 3 years or more.

Nature: Equity oriented open ended

Inception: August 2005

Assets under management: Rs 13 crore at the end of February 2012

Fund Manager: Shreyash Devalkar

Analysis

• This is a multi cap fund that seeks to make use of high dividend yield companies available in the market where a dividend yield of more than 0.5 per cent will be considered as a high dividend yield. At the end of February 2010 banks had the highest exposure in the portfolio with a figure of nearly 15 per cent. This was followed by consumer non durables and petroleum products. In terms of the top holding NIIT Technologies was at the head and what was interesting is that the top 10 holdings did not have a single bank. There were two petroleum companies Castrol and IOC, two finance companies REC and Bajaj Holdings & Investments and two consumer non durables EID Parry and VST Industries in the top 10 list. The fund was outperforming its benchmark the BSE Sensex over the three year time period but underperforming over the one year period. It has a very high turnover ratio of 2.5 times.
• Six months later both banks and petroleum products had a similar exposure of just below 19 per cent of the portfolio. Consumer non durables were the only other sector where the exposure was in excess of 10 per cent.  Even under these conditions not a single bank holding was within the top 10 list though 4 petroleum companies namely HPCL, BPCL, Chennai Petroleum and IOC made the list. Wyeth was the top holding in the portfolio. The turnover ratio dropped to 1.2 times and the fund was now an outperformer over the one as well as three year time periods.
• At the end of February 2011 petroleum products was now the top sector followed by consumer non durables and then by banks. ONGC was the top holding in the portfolio followed by ITC but now the portfolio was quite spread out with two power companies - Power Grid and Gujarat Industrial Power as well as two petroleum companies - BPCL and Castrol being present in the top 10 list. The fund was an outperformer over the one and three year time periods but not the five year one.
• Six months later petroleum products and consumer non durables had an exposure of around 15 per cent each in the portfolio. This was followed by banks and power. Now there was a change in the situation as two banks were now in the top ten holdings and they were both public sector banks - Oriental Bank of Commerce and Union Bank of India. Power Grid Corporation was the top holding and this with NTPC comprised the companies from the power sector in the top ten lists.  The fund was now outperforming the benchmark over the one, three and five year time periods
• There was a significant change in the portfolio over the next few months and at the end of February 2012 consumer non durables was the top sector with an exposure of 18 per cent.  No other sector had a 10 per cent plus exposure though and the sectors that followed included power, petroleum products, software and cement.  Power Grid was the top holding followed by ITC and there were three consumer non durable companies in the top 10 list. 8 per cent of the portfolio was in cash and cash equivalents and the portfolio turnover ratio had jumped to 1.4 times.
• This fund is meant for investors who want to gain from holding dividend yield stocks in their portfolio by using a conservative approach and is suitable for those who have a time horizon of more than 3 years.

- Arnav Pandya

The author can be reached at arnavpandya@hotmail.com

Disclaimer: Views expressed in this article are entirely personal.