Best Dividend Paying Stocks to Buy in India – List of Top 10 Dividend Shares of 2024Last Updated Date: Jan 02, 2024
Investing in stocks has primarily two objectives. One is wealth accumulation, and another is regular income. A regular stream of income from stocks can be generated through dividends.
So, in this article, you will be reading about those stocks which we rank as the Best Dividend Stocks to Buy.
The article will list the highest dividend paying stocks in India and explain the nature of the businesses for each of these stocks.
Then we will be taking you through the concept of dividend paying stocks and the fundamental metrics you need to check for buying these stocks.
Apart from that, we will be covering different financial ratios for evaluating these dividend stocks to buy and a lot more.
Know about Dividend Paying Stocks in India
If you are looking for top dividend paying companies in India, you first need to understand the concept of dividend paying stocks to buy.
Dividend stocks are stocks of those companies which pay a regular dividend, most often yearly dividends. Now, what is the dividend?
So, the dividend is the portion of the company’s profits that they divide amongst the shareholders. Large companies or well-established businesses pay regular dividends to the shareholders.
The dividends are usually paid by the companies in cash or additional shares as per the valuation of the dividends. However, in times of market turmoil or if the companies incur losses, dividend payments may also stop.
The company also may not choose to pay dividends in some years and put the amount as a reserve for future developments in the business.
Top 10 Dividend Stocks to Buy Today in India
Check out the Dividend Share Price & Ranking of Best Dividend Shares to buy Today or Tomorrow or for Long Term –
If you are thinking of Dividend Shares to Buy, then you are at the right place. Here you will find the details of the top twenty dividend paying stocks in the country.
The list begins with Gujarat Pipavav Port and is followed by Coal India, Hero Moto Corp, and many others. We have made this list of twenty stocks that pay great dividends based on three criteria.
Firstly, we have checked the dividend history of the companies and whether they have paid consistent dividends for at least the last five years or not.
Then we checked their dividend payout ratio and dividend yield. We have ranked these stocks based on the dividend payout ratio.
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Gujarat Pipavav Port – Best Dividend Stock in India
Gujarat Pipavav Port is the Best Dividend Stock in India as per the dividend payout ratio. It is a company based in India engaged in the development of port and manages operations of port Pipavav.
This port is located in Mumbai, 150 nautical miles away from Nhava Sheva. It belongs to the Industrial Sector and falls under the Transportation Infrastructure Industry.
Products or Services
Gujarat Pipavav Port Ltd. offers cargo handling facilities for bulk containers, liquid containers, breakbulk, etc.
This port is also engaged in maritime services without any third party’s involvement and offers land-related and infrastructural services.
The Pipavav Port is the first of India’s private sector ports that offers multi-user operations and multi-cargo operations.
Why invest in the Gujarat Pipavav Port Stock?
The primary reasons for investing in these stocks are as follows:
- This dividend paying Share to Buy has more TTM PE than the sector PE. This indicates the company’s price probably will rise in the future.
- The company’s dividend payout ratio for 2021-2022 is around 102.69%, which is huge for any dividend paying company. This indicates the capability of the company to pay dividends over the years to come. At present, this company has the highest dividend payout ratio.
- Even the company’s dividend yield is close to 5%, which means the company’s dividend paid is increasing at a rate of around 5%.
- The FIIs and FPIs are increasing their shareholding in the firm, which is another sign of the high prospect of the firm.
- There is a strong cash-generating ability of the firm from the core business. This signifies that the company can also pay its dividends from the free cash flow statement.
- There is no debt in the company, another criterion for the dividend paying stock investors.
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Coal India – Highest Dividend Shares to Buy
Coal India is the biggest company globally when it comes to coal production. As the name suggests, this is a company that originated in India.
It offers its products and services to various industries worldwide, such as the power sector, steel, cement, and many other industrial companies.
Products or Services
This Highest Dividend Shares to buy offers both non-coking and coking coal. There are different grades of coal as the uses of coal produced by this company are highly diverse.
There are also products like coal fines, coke fines, tar, heavy oil, light oil, etc.
Why invest in the Coal India Stocks?
The primary reasons for investing in these dividend paying stocks in India are as follows:
- The dividend payout ratio of Coal India is 93.38% which is the second-highest among all the top dividend paying companies in India.
- The dividend yield is around 7.91%, one of the highest amongst others on this list. Also, the company has been paying dividends consistently for years.
- The share has gained around 61.66% over the past year.
- The company can generate enough cash flow from the operations/ core business activities. This signifies the reason behind the high dividend payout ratio.
- The company’s earnings per share have also been growing on a TTM basis.
- The FIIs and the FPIs also increase their shareholding pattern in the business.
- The debt in the company is low, which is another plus for the dividend stock investors.
Hero MotoCorp – Top dividend paying Stock
Hero is a name that hardly anyone in India may not know, isn’t it? This company has been in the country for years and is still going strong after competition from so many motor companies across the country and globe.
Hero MotoCorp belongs to the Automobiles Industry and Consumer discretionary sector.
Products or Services
The products offered by this Top dividend paying Stock include two-wheelers, spare parts, and other accessories related to motorcycles.
The products of Hero MotoCorp range from motorcycles to scooters and parts of it. Hero MotoCorp’s famous motorcycles include XPulse and its different variants.
Then Glamour, Splendor and their variants, Passion, and more. The scooter segment has Maestro, one of the most popular scooters/scooty from Hero.
Why invest in the Hero MotoCorp Stocks?
The reasons for choosing this dividend paying company’s Share Price for investment are as follows –
- The company has consistently provided dividends to the shareholders in the past five years with an increasing dividend yield of 4.14%.
- The dividend payout ratio of Hero MotoCorp has been high as well; it was around 65.66% in the past year. This tells the investors that the company has enough earnings/cash flow to pay out dividends in the upcoming years.
- The debt percentage in the company’s financial structure is also low. This also suggests that shareholders will probably get dividends when the company makes a profit.
- The foreign institutional investors are increasing their shareholding in the company, which depicts the business’s growth potential.
- Finally, the book value per share of Hero MotoCorp has been increasing over the last two years.
Bajaj Auto – Top dividend paying Company in India
Bajaj Auto embarked on its journey in 1945, even before independence, and today, Bajaj Auto is one of the most popular Indian Automobile companies and is famous across the globe.
In these 75 years, they have produced different motorcycles, scooters, 3-wheelers, and lots more. It is the largest producer of three-wheelers across the world as well.
It is also the first company in the two-wheeler and three-wheeler segments whose market capitalization reached Rs. 1 trillion.
It is regarded as the world’s most valuable company in this segment.
Products or Services
Bajaj Auto products are varied and offer different specifications for different customers.
From two-wheelers like evergreen and the most popular Pulsar to recently launched Dominor, and vintage Bajaj Chetak, all are selling in the markets like no other bikes/scooters.
This company also develops Quadricycles which are hardly produced by any of its peers.
Some of the most in-demand products of Bajaj Auto are Bajaj Pulsar 200 NS, Pulsar 150, Pulsar 135 LS Discover, New Discover 150 F, Platina 100ES and a lot more.
Why invest in the Bajaj Auto Stocks?
The primary reasons for investing in this Top dividend paying Company in India are as follows:
- There is no debt in the financial structure of Bajaj Auto. This signifies that the company will be able to pay dividends when it makes a profit, provided it doesn’t want to shift all the profit to Reserve.
- Then, there is increasing shareholding from FIIs and FPI in this company, which is another sign of the firm’s growth potential.
- The dividend payout ratio has been 65.44% for this company in the past year, while the dividend yield is 3.84%. These figures suggest great dividends for the shareholders in the future. Also, Bajaj Auto has been paying dividends consistently over the years.
- The company’s revenue has been increasing as per the company’s quarterly reports. It has been increasing for the last two quarters consistently.
- Another factor to consider is that technical analysis of this Highest dividend paying Stock suggests that it has strong price momentum and the price can increase in folds soon.
VST Industries – Top Dividend Stocks to Buy
VST Industries belongs to the tobacco industry, and it is an Indian company that has manufacturing plants in Hyderabad and Toopran, both in Telangana.
It was established in 1930 and is still running strong with the manufacturing of different tobacco products.
Products or Services
The products which this company sells include cigarettes and unmanufactured tobacco as well. The popular brands from this company include Total, Charms, Moments, Special, and Editions.
Why invest in the VST Industries Stocks?
If you are considering stocks that pay dividends, then you can consider VST Industries as:
- It has a dividend payout ratio of 57.55% with a dividend yield of 3.55%. Both the figures are among the highest in the industry. This company belongs to and is also among the top dividend stocks to buy.
- The company has been consistent with its dividend payments as well.
- The company’s profit margin has been growing on a QoQ basis, which also suggests that the company will be able to pay dividends to the shareholders.
- There is no debt in this company which is a great relief for the investors looking for dividend stocks.
- The FIIs are increasing their shareholding in the business.
- VST Industries Stock predictions say that the stock prices will rise in the next few months.
Torrent Power – Top 20 dividend paying Stock
Torrent Power, our sixth pick for Top 20 dividend paying Stock, is a key market player in the country’s power sector. It is a subsidiary of Torrent Group, a business conglomerate in the healthcare and power sector.
This company was started by overtaking Mahendra Electricals. Then going forward, it took over multiple power projects and electricity companies.
Products or Services
Torrent Power can generate 3879 Megawatt of electricity and generate this power through a unique process. They use coal, gas, and also renewable energies to produce electricity.
Transmission of the power generated at the plant is another major area this business house serves.
It has 105 km and 249 km 400 kV double circuit transmission lines for transmitting the power. It is also engaged in the distribution of power.
Apart from these, Torrent Power also manufactures cables and other similar products used in the electricity/power sector.
Why invest in Torrent Power Stocks?
If you are wondering whether it will be a good decision to invest in this High dividend paying Stock in India, then here are some fundamental analysis and facts about the company:
- Torrent Power has a dividend yield of 2.68%, which means the company’s dividends per share have been growing at this rate in the last year.
- The dividend payout ratio is 52.05% which suggests the future possibility of paying dividends is high.
- ROA has been improving, which signifies that the company’s management is efficient and can churn out profits using the company’s assets.
- The company’s revenue has been growing for the past four quarters.
- There is an increase in the firm’s net profits, and the book value per share has been increasing.
- The FIIs and FPIs are investing in the stocks of this company too.
MphasiS – dividend paying Shares in India
MphasiS is one of the leading businesses in the information technology industry. It has its presence across the globe. It has its registered office in Bengaluru.
The company is headed by Davinder Singh Brar, who is the chairman.
The CEO and Executive Director of MphasiS are Nitin Rakesh, and in the position of the Director, there is Jan Kathleen Hier and David Lawrence Johnson.
Products or Services
MphasiS offers specialized services like the development and maintenance of different applications for business, business outsourcing services, and infrastructure outsourcing services/solutions to clients across the world.
The clients of this company are from varied industries such as banking, capital markets, information technology, insurance, entertainment, and more.
It also offers inbound and outbound customer service programs and services to different enterprises that outsource their customer support services.
Why invest in the Mphasis Stocks?
This dividend paying Share in India is on our list because of the following reasons:
- The company’s financial structure has very little debt in it. Though debt is good for leveraging a business, the excess can kill it. Moreover, debt in the financial structure means a threat to shareholders as the company usually chooses to pay off its debt first before providing any dividend to the equity shareholders.
- The company’s profits have increased alongside the revenue for the past two years. Both are positive signs of growth.
- Cash flow from operating activities has improved for the past two years. This also indicates the company’s capability of paying off dividends.
- The FIIs and the FPIs are increasing their stakes in the company, which is another sign of growth prospects.
- The book value of the share has been increasing, which is a great sign as well.
- Last year’s dividend payout was around 48% which is quite a phenomenal number in the market.
- The dividends of MphasiS almost grow around 1.31% every year, given the current dividend yield.
- Mphasis Share Forecast suggests that it has very good future potential.
ITC – Top Twenty dividend paying Companies in India
Amongst these top twenty dividend paying Companies in India, our 8th pick is ITC.
This company needs no introduction as it is one of the leading information technology businesses worldwide. It has a market capitalization of $45 billion.
The yearly turnover is around $7 billion; this is the first IT company in the private arena to have huge market capitalization and turnover. It is one of India’s ten most valuable companies as well.
Products and Services
ITC provides multiple services and has different products. It is a brand in the tobacco industry, and most of the cigarettes manufactured are from the ITC brand.
While a cigarette is one of the most important business segments of ITC, FMCG, Agri-business, Information Technology, Packaging, hotels, paperboards & specialty papers, and many others are also there.
It is also present in the packaged food industry and increasing its presence in the share market.
Why invest in ITC Stocks?
ITC being one of the top dividend paying stocks to buy in the country, have multiple benefits, and you can invest in it due to the following reasons:
- ITC has kept its debt percentage in the financial structure lower. This ensures the shareholders don’t have lots of debt to repay when the company makes a profit. So, the company will be able to make dividend payments if they choose to.
- The next reason for investing in ITC could be its increasing revenue which has been increasing for the past two quarters. Along with the revenue, the profit has also been increasing.
- Foreign institutional investors are investing in the company and increasing their shareholding.
- The dividend payout ratio of ITC has been 47.21%, while the dividend yield is around 4.12%.
PTC India – Top Dividend Stocks to Buy
PTC India is our 9th pick for the Best dividend paying Companies in India. It is engaged in the power supply business in the country.
It has its registered office in New Delhi, headed by Rajib Kumar Mishra.
Products or Services
PTC India is engaged in the trading of power. This means that the company balances the gap between power generation and power supply and the demand and supply of power.
It enters into contracts with power producers who produce power independently and then sells the same to the industries and other places where there is a requirement.
Why to invest in PTC India Stocks?
PTC India is one of the Top Dividend Stocks to buy because of the following reasons:
- It has a high Piotroski Score which suggests the strong fundamentals and financials of the company. This, in turn, signifies strong management of the company.
- The company’s profit margin has been growing, and so is the profit. This is a huge sign of the company’s growth, and for shareholders, it is beneficial as shareholders can get dividends when the company makes a profit.
- The company’s net cash flow has also been increasing for the past two years, another great sign for the dividend stock investors.
- PTC India’s book value per share has been improving too.
- The revenue PTC India generates has been increasing for the past three quarters.
- This company has a dividend payout ratio of 46.96%, while the dividend yield is quite high and one of the highest amongst the other shares at 7.65%.
- According to PTC India Stock Prediction, it is expected to provide decent returns.
Indian Oil Corporation – Top 20 dividend paying stocks
Indian Oil Corporate needs no introduction, as it is one of the leading oil companies across the country. It is our 10th pick for the Top 20 dividend paying Stocks.
Also, it has the largest and widest petrol and diesel station network across the country. It is headed by Chairman Shrikant Madhav Vaidya and Director G K Satish, and its registered office is in Mumbai.
Products or Services
The products and services Indian Oil Corporation offers include different types of fuels for automobiles like petrol and diesel.
It also offers kerosene, pump set oils, tractor engine oil, and engine oil for other cars.
The company also offers fertilizers, farm equipment, seeds, and other agri-products under its Kisan Seva Kendra services.
Another great product and service offered by Indian Oil Corp. are their Swagat Brand outlets at petrol pumps, where you can get a food court, restrooms, first aid, and more.
Why to invest in Indian Oil Corporation Stocks?
Indian Oil Corporation is the 10th Highest dividend paying Stocks because of the following reasons:
- It has consistently offered dividends and has one of the highest dividend yields, close to 9% ( 8.93% accurate figure). The dividend payout ratio is also high, around 44.14%.
- The company’s TTM EPS has been growing impressively and is good for future investments.
- Foreign Institutional Investors have been increasing their shareholding in the company, suggesting future growth prospects.
Tata Consultancy Services (TCS) – dividend paying Stock to Buy
Tata Consultancy Services (TCS) is one of the most reputed IT consultancy firms globally.
It is an Indian-origin IT firm that has become a global business and has a presence across 46 different countries. N. Chandrashekaran heads it at present.
Products or Services
TCS offers multiple technology solutions to all types of businesses and provides business expertise.
It also has an outsourcing business where it deals with projects of other businesses, banks, financial companies, infrastructure companies, and any other types of business that need tech solutions.
Why to invest in Tata Consultancy Services Stocks?
You can invest in this dividend paying Stock to buy because of the following reasons:
- There is no debt in the financial structure of the company. This signifies that if the company makes a profit, it doesn’t have to pay the debt before paying its dividends. So, if TCS wants to share profit with the shareholders, it can easily share without paying off debt.
- The company’s revenue has been increasing for the past four quarters, which signifies growth in the business. This, in turn, indicates higher returns for the shareholders too.
- Profit has also been increasing along with revenue, and the shareholders can expect dividends to pour in heavily.
- There is management that churns out profit out of the core business activities, and thus, the cash flow from operating activities/ core business is excellent and has been increasing. This is another point that you, as a dividend investor, can consider.
- The dividend payout ratio of TCS has been around 38.04% for the past year, and you can expect your dividends to grow at around 1.19% this year.
SJVN – Top dividend paying Companies
SJVN, which stands for Satluj Jal Vidyut Nigam Ltd. It is the largest hydroelectric power generation business in India.
It can produce 1912 MW of electricity from water. The company was started as a joint venture between the central government and the Himachal Pradesh State Government to develop and operate the Nathpa Jhakri Hydro Power Station.
Products or Services
It provides electricity to the districts of Himachal Pradesh, and it has been targeting different hydro projects out of India as well. It will start another plant where around 412 MW of electricity can be produced.
Why to invest in SJVN Stocks?
This dividend paying Company to buy is one of the top dividend paying companies per our list because of the following reasons:
- The net profit margin and the company’s overall net profit have increased YoY.
- The company has a very nominal debt in its financial structure.
- The book value per share of the company has been improving for the past two years.
- The FIIs and the FPIs have been investing in the business and increasing their shareholdings.
- There is strong cash flow from core business activities.
- The dividend payout ratio is 37.95%, while the dividend yield is 5.25%.
- SJVN Stock predictions say that the stock prices will rise in the coming months.
JK Paper – Highest Dividend Company’s Stocks in India
JK Paper is a renowned name in the paper industry. It deals in the manufacturing and sale of different types of papers. The company is headed by Bharat Hari Singhania, the company’s present chairman.
It is based in Gujarat and supplies products across India.
Products or Services
The products and services of JK Paper include fine papers, branded papers, packaging boards, multi-purpose papers, paper required to print photos, and all types of papers.
JK Paper not only sells their products in the retail market but also has tie-ups with business houses where they supply all the papers required for documentation.
Why to invest in JK Paper Stocks?
The main reasons for investing in this Highest Dividend Company’s Stocks in India are –
- The TTM EPs of the company have been growing, which is a positive sign of growth.
- The FIIs and FPIs are investing in the share and increasing their shareholding in the company.
- The net profit and the profit margin are increasing, which is a great sign of growth in the business, especially the profit margin growth.
- The revenue has also been increasing consistently for the past two quarters.
- The company’s dividend payout ratio has been around 33.32%, while the dividend yield is 1.13%.
- The company has a strong annual report which attracts all types of Investors.
NMDC – Best dividend paying Stock in India
NMDC Limited is India’s largest producer of Iron Ore and the tenth-largest across the globe.
It was incorporated in 1958, and it is a government undertaking. NMDC is also the only mechanized mine for diamonds in Southeast Asia.
It has four Iron Ore mechanized mines at Bailadila Iron Ore Mines, Kirandul Complex, and Bacheli Complex in Chhattisgarh.
Another one is at Donimalai Iron Ore Mine, and finally, there is Kumaraswamy Iron Ore Mine which is in Karnataka.
Products or Services
The products of NMDC Limited include mainly Iron Ore and other by-products of mining. The main client of this company is the steel and construction companies.
The infrastructure companies are another mail clientele of NMDC.
Why to invest in NMDC Limited Stocks?
The prime reasons to invest in this Best dividend paying Stock in India are as follows:
- The net cash flow of the company has been increasing. The main source of cash flow is the company’s operating activities, which means the company’s core business is generating cash flow for the company. This is significant for dividend stock investors as they should look for good cash flow companies.
- The book value per share of the company has been improving.
- The annual EPS growth of the company has been improving and is good for long term investment.
- Foreign institutional investors are increasing their shareholding in the company, which is a sign of positive growth.
- There is very little debt in the company, which is an added benefit for the shareholders.
Housing & Urban Development Corporation – High dividend paying Stock
Housing and Urban Development Corporation Ltd. is a company that facilitates the development of houses by providing financial assistance, including loans.
It was founded in 1970, and the 50+ years of its run, it has become one of the major housing development firms in the country.
Products or Services
HUDC offers loans and other financial assistance in developing buildings and houses in different areas. It has been providing its services across rural and urban areas.
Moreover, it facilitates the up-gradation of slum areas, helps build houses for staff, and even offers financial assistance for building public utility housings like toilets.
Furthermore, it provides financial assistance in the repair and renewal of houses.
Why to invest in Housing & Urban Development Corporation Stocks?
The main reasons for investing in this High dividend paying Stock in India are as follows –
- The net cash flow from core business activities has increasingly given way to better dividends.
- The book value per share of the company has increased for the past two years.
- The company has a Zero Promoters Pledge.
- The FII and FPIs are increasing their investments in the HUDCO.
- Last year’s dividend payout ratio was 19.07%, while the dividend yield was 6.07%.
- HUDCO Share Forecast suggests that it has very good future potential.
Petronet LNG – High dividend paying Stocks in India
Petronet LNG is our 16th pick for the High dividend paying Stocks in India. It is a leading petrol and natural gas supplier. It is promoted by GAIL, ONGC, IOCL, and BPCL.
This company is headed by Tarun Kapoor, the chairman of the company. It is based in New Delhi and was formed in the year 1988.
Products or Services
Petronet LNG is engaged in producing and supplying natural gas and petroleum products. It supplies not only in India but in other countries too. It has its terminals in Dahej and Kochi.
Why to invest in Petronet LNG Stocks?
The primary reasons for investing in Petronet LNG are as follows:
- The company’s revenue has consistently been growing for the past four quarters.
- The RoCE has also improved, indicating management’s efficiency in using capital employed thoroughly.
- The ROE has also been improving, which means the management uses the shareholder’s capital properly to optimize profits.
- The cash flow from the core business has been growing too for the past two years.
- Furthermore, the net profit has been increasing as well.
- The company’s dividend payout ratio has been around 15.98%, while the dividend yield is around 5.08%.
GAIL India – High dividend paying Stock in India
GAIL India is one of the leading natural gas companies in the country. It has all the aspects of natural gas production and supply facilities.
GAIL is headed by Manoj Jain, the organization’s chairman, and M.D and CEO. It is based out of New Delhi.
Products or Services
GAIL is involved in the exploration, production, processing, transmission, and distribution of natural gas. It also offers marketing and other related services.
Apart from natural gas, GAIL also produces other petrochemicals, liquid hydrocarbons, and other products.
Why to invest in Gail India Ltd Stocks?
The most important factors which make this High dividend paying Stock in India, GAIL, an interesting buy for the dividend stock investors are as follows:
- The company’s dividend payout ratio has been around 15.73% for the past year.
- The dividend yield has also been high at 5.48%. This suggests that the dividends paid by the company can increase by this percentage as calculated based on the company’s earnings.
- GAIL has been consistent with its dividends and pays them every year.
- The TTM EPS of the company has been improving, which suggests that the investors’ earnings will also increase.
- GAIL has limited its uses of debt in its financial structure. It has very nominal debt, and thus, it has no huge burden of repaying debt which can cut short your dividends.
- The FIIs and the FPIs are increasing their shareholding in the company, which is a sign of its prospects.
- The company’s net profit has increased while the profit margin is also going up. This is a sign of a high-growth company, and thus, the investors can earn dividends and see great appreciation in their investments.
- The profits are rising, and the prime reason is the revenue increase. The organization’s revenue has been increasing for the past four quarters continuously.
Hinduja Global Solutions Ltd. – High dividend paying Stock in India
Hinduja Global Solutions Ltd. is a leading company in the outsourcing business. It provides services and products to Fortune 500 companies and other companies.
The organization’s headquarters is in Maharashtra, and Yashodhan Madhusudhan Kale heads it.
Products or Services
The services offered by Hinduja Global include intensive technical support for different various consumer electronic products.
It also offers installation and configuration services and provides technical support as well. The products which it offers are electronic parts and accessories.
It also offers health insurance policies, banking, financial services, and credit card sales.
Why to invest in Hinduja Global Solutions Stocks?
Hinduja Global is our 18th pick for High dividend paying Stock in India. The reason for this is here :
- TTM EPS has been growing, and it is growing at a significant speed.
- The company’s profits have been increasing for the past two years. It is highly significant for investors who are looking for dividend stocks. Higher profits mean higher dividends.
- The RoCE of the company has been increasing, which signifies great management who efficiently manages and puts capital employed to use.
- The ROE has also increased, which means the management uses the shareholder’s equity efficiently.
- The book value per share of the firm has been increasing too.
- The company’s dividend payout ratio has been around 14.51%, which is a fair value. However, the company’s dividend yield is high at 9.35%, one of the highest amongst the dividend stocks.
Oil India – High dividend paying Stock in India
Oil India is an Assam Based petrol and natural gas company. It is headed by Sushil Chandra Mishra, the chairman and managing director of the company.
Indoil Netherland B.V holds 50% of the company as it is a joint venture.
Products or Services
Oil India has products and services that include crude oil, liquid petroleum natural gas, natural gas, and pipeline transportation.
There are 156890 kilometers of acreage which is under exploration for petroleum.
It also has overseas investments in petroleum-based products and services.
Why to invest in Oil India Stocks?
The main reasons for investing in this High dividend paying Stock in India are as follows:
- The TTM EPS of the company has been growing.
- Oil India has a high Piotroski score, which signifies the company’s strong financials.
- The company’s net profit has been increasing with profit margin improving.
- The FII and FPIs are investing in the company and growing this shareholding.
- The revenue of the company has been growing for the past two quarters.
- The company’s dividend payout ratio has been around 9.46%, while the dividend yield is around 4.5%.
- The dividend paid by the company has also been consistent, and thus, it is a good investment for the dividend stock investors.
Rural Electrification Corporation Limited (REC) – High dividend paying Stock
Rural Electrification Corporation Limited (REC) is a central public sector enterprise and a Navaratna company under the Ministry of Power.
It was set up to facilitate and provide financial assistance and promote rural electrification projects.
The organization is headed by Sanjay Malhotra, the organization’s chairman at present, and the M.D. It is based in New Delhi.
Products or Services
REC provides financial assistance to government departments, whether the state or central, and the rural electrification units.
It comes up with different projects and investment schemes to assist rural electrification programs.
Why to invest in Rural Electrification Corporation Limited Stocks?
The key factors for investing in this High dividend paying Stock in India, REC, are:
- A Dividend yield of 13.16% is the highest amongst all the dividend stocks mentioned above. Even the dividend payout ratio is around 8.55%.
- The company pays regular dividends, and the organization’s TTM EPS is quite high.
- Its quarterly profits are increasing, and the profit margins are also increasing.
- The book value per share of the company has been increasing for the past two years, which signifies growth.
- REC of the company has been increasing for the past two years.
How to identify a Good Dividend Stock for Trading?
We have analyzed different factors to prepare the list to buy dividend paying stocks given above. You can consider the following while identifying top Dividend Stocks in 2022:
- Firstly, you need to check the cash flow of the company. The growth in cash flow is a primary factor to look for when considering dividend stocks. You need to evaluate whether the company can generate cash flows from core operating business activities or not.
- The,n you need to keep an eye on long-term profitability. A company can be profitable in the short-term, for a quarter or two; however, while picking up dividend stocks, you need to choose those companies whose earnings are growing at least at a rate of 5% to 15% per year. The annual growth in earnings is what you need to consider for dividend paying stocks. These earnings must be consistent as well. It shouldn’t be like the company made a profit in one year and the next two years, it was in loss.
- Another factor to consider while picking dividend stocks is the percentage of debt in the financial structure. While a certain percentage of debt helps in leveraging the business, if the company is neck-dipped in debt, stay away from those companies if you are looking for earnings dividends. The reason behind this is simple. If the company has a lot of debt that it has to repay, it will be using its earnings to repay the debts and not dividends.
- Now the third factor for identifying the dividend stock is industry trends. You need to check whether the industry is performing well or not altogether. If you pick a company that is earning well, but in a sluggish industry, where the demand has been dropping, eventually, the company’s products will be less in demand, and loss will occur. Thus, industry evaluation is necessary while picking up dividend stocks.
Important Financial Ratios to Identify Dividend Shares
To identify the Best dividend paying Stocks to Buy, you need to evaluate certain financial ratios. This will help you figure out which dividend paying Stock is a good buy.
These key financial ratios are:
Dividend Payout Ratio
The dividend payout ratio is the most important factor in deciding which dividend stock you should buy. You can derive the dividend payout ratio by dividing total dividends by net income for the year.
Another way of calculating the ratio is by dividing annual dividends per share by earnings per share. The dividend payout ratio indicates what percentage of the annual earnings per share of the company is paid as dividends.
If the company pays cash dividends, then net profit is used for dividing the dividends, while for dividends paid as shares, free cash flow is used instead of net profit.
Dividend Coverage Ratio
The second most important financial ratio you need to consider when choosing dividend stocks is the dividend coverage ratio. You can calculate it by dividing the annual EPS of the company by the annual DPS.
You can also derive it by dividing the net income less the amount required to pay dividends to preferred shareholders by its common stockholder’s dividends.
This ratio indicates the frequency of dividend payments that a company can make using its net income for a particular period. The higher the dividend coverage ratio, the more favorable it is for the shareholders.
Net Debt to EBITDA Ratio
This ratio you can calculate by dividing the company’s total liability less cash and cash equivalent by the EBITDA for the year.
If this ratio is higher, it will indicate chances of cutting down dividends in the future.
Free cash flow to Equity
This ratio is for understanding whether the company can pay its dividend using its free cash flow or not.
This can be derived by subtracting the net capital expenditures, change in the networking capital, and debt repayment from the net income and then adding net debt to it.
Important Annual Report Metrics to Identify Dividend Stocks
Apart from financial ratios, you need to check certain annual financial metrics for choosing the High dividend paying stocks:
Firstly, you need to evaluate whether the company’s net profit is consistent or not. Also, you need to evaluate how much net income the company is using for paying the dividends to the company.
You need to check how much liability the company has, mainly in debt. If there is debt on the balance sheet, the company will pay it first and then dividends.
Another metric that you need to check is the company’s free cash flow. You need to check and evaluate the cash flow from the operating expense for dividend stocks.
Why to invest in dividend paying stocks?
You can consider investing in dividend paying shares because of the following reasons:
Dividends can be a great source of earning passive income.
The top dividend paying companies to offer dividends annually and even interim dividends, and thus, you can generate a source of passive income from these dividends.
Dividend stocks are less risky
Dividends are usually paid regularly by those companies which are well established and have a brand value in the market.
Thus, investing in these stocks reduces the overall risk of your portfolio, too, as big companies are less volatile to market fluctuations.
The best part of earning dividends is reinvesting and earning on the amount. Suppose you earned Rs. 10000 as dividends from ABC company, you reinvested that dividend amount into shares of the same company or other companies.
From that investment, you can earn other returns and dividends as well. So, it is like compounding your investments and earning compounding returns.
While dividends are a source of passive income, the Stock’s appreciation in value also helps you accumulate wealth.
So, on the one hand, you are earning dividends, and on the other hand, your portfolio valuation increases as the price of the shares increase.
However, as dividend paying stocks are of big companies usually, there may not be much appreciation in the price of the stocks.
Help you Fight Inflation
With the rise in inflation in the nation, it is important to make inflation-proof investments. With dividend stocks, you can make your investments inflation-proof.
The reason or mechanism behind this is the amount you invest helps you earn dividends and wealth accumulation. Now, the dividends are the profit over and above the expected return, which can help you beat the inflation.
How to Invest in dividend paying stocks?
If you want to invest in dividend paying stocks, you need to follow these steps:
- Firstly, open a Demat and Trading account.
- Then look for the Best dividend paying Stocks in India.
- You can refer to this article as a guide or do your research.
- Once you know which Stock to invest in, select the Stock from your online trading app or trading terminal.
- Enter the number of units you want to purchase.
- Then enter the share price at which you want to purchase. You can use stop loss to minimize your losses and maximize your gains.
- Finally, place the order and wait for the allocation of the shares to your Demat account.
- Then, you can hold the shares as long as you want and earn dividends when the company pays the same.
Cons of Investing in Dividend Paying Stocks to Buy
While there are many advantages of investing in High dividend paying Stocks to Buy, there are certain drawbacks. Some of the drawbacks are like:
- There is very nominal growth in the share prices of dividend paying companies.
- Then, the price of each share is comparatively higher as they are established companies.
Conclusion – Highest dividend paying Stocks in India
Investing in the Highest dividend paying Stocks in India can help you build a source of passive income, beat inflation through your investments, and more.
However, the main thing here is to pick the right Stock. Once you pick the right Stock and invest in it, you can easily earn regular dividends and great returns.
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