Returns from 9 banking stocks turn attractive than bank deposits

If you deposit money in the banks, you can get a maximum annual return of six per cent. But if you park money in fundamentally strong banking stocks, you can get more returns than bank deposits.

Here are nine banks that gave higher returns than a bank fixed deposit in 2021.

Premier Bank investors received highest dividend yield of 9.26 per cent in the year, followed by Prime Bank 8.71 per cent, Mercantile Bank 8.50 per cent, Dhaka Bank 8.45 Per cent, Jamuna Bank 8.37 per cent, Exim Bank 8.20 per cent, Bank Asia 8.06 per cent, NCC Bank 7.74 per cent and Uttara Bank 6.01 per cent.

The nine banks declare dividends at a higher rate than the interest rates offered by savings certificates.

Dhaka stock exchange (DSE) Director Shakil Rizvi told The Business Post that although dividend yield is important in investment decisions, investors do not take it into consideration.

At the beginning of 2021, the bank share prices did not move much. Basically, when the share price is lower than the dividend ratio, the return will naturally be higher. It means if the share price of a bank is Tk 10, if that bank pays 10 per cent cash dividend, then the return of that bank will be near 10 per cent.

The advantage of considering dividend yield is that investors can understand how much profit is made by investing in a company, said Rizvi.

“Dividend yield is a very simple matter, but no one follows. Everyone just invests watching share price movements,” said Bangladesh Merchant Bankers Association (BMBA) President Sayadur Rahman.

“If investors now keep money in the banks, they will get 6 percent interest annually on deposits. In case of savings certificates, the profit is calculated annually and a bit higher,” he said.

“But in the case of the capital market the calculation is different. The best option for an investor is to buy a share before the record date of any company and get a return on their investments within two to three months,” he added.