Dividend Investing
Mature companies like ITC, Coal India, or REC that don't need billions to build new factories anymore pay out huge percentages of their net profit straight into their shareholders' bank accounts. This strategy creates passive income while theoretically preserving the original capital stock price.
Beware of Yield Traps
- Math Warning: Suppose a ₹100 stock pays a massive 15% (₹15) dividend, but its core business is dying and the stock falls to ₹50 over the year. You gained ₹15 in cash but lost ₹50 in capital. This is a yield trap.
- Tax Reality: Dividends fall heavily under the new tax regime, being taxed directly at your highest personal income slab (up to 30%+), taking a big bite out of the gross yield.