Highest dividend paying stock

Dividend is a distribution of profits by a company to its shareholders. After earning profits or surplus the corporation is able to pay some amount of the profit as dividends to its shareholders. Any corporation can share a part of its profits with four different types if dividends which are Cash dividend, Stock dividend, Hybrid dividend or Property dividend. The dividends received are just some portion of the company’s earnings which the management chooses to pay out to the shareholders. The payment received in the form of dividends do not actually increase the value of your portfolio. They can turn out to be beneficial but they are not free money.

Advantages of investing in high dividend yield stocks

1. Dividends do act as a consistent income.

2. Sometimes high-yield indicates the company can survive tough markets.

3. Reinvesting dividends leads your portfolio grow at a healthy pace.

Points to keep in mind while selecting high dividend stocks

The corporation should at least have a dividends payout ratio of 40%. Dividend pay out ratio is the proportion of earnings paid out by corporations as dividend to shareholders which is typically expressed as a percentage. There are corporations that pay out all the earnings to its shareholders whereas there are also some that only pay out some portion of their earnings. Many considerations go into interpreting the dividend payout ratio, most importantly the company’s level of maturity. There are companies that reinvest most or all of its earnings for a new, growth-oriented company which aims to expand, develop new products and move into new markets are forgiven for having a low or even zero payout ratio.

Overall dividends yield should be atleast above 3%. The dividends yield which is expressed as a percentage is a financial ratio (dividend/price) which shows how much a corporation pays out in dividends each year relative to its stock price. Investors should keep in mind that a high dividend yield does not always indicate attractive investment opportunities since the dividends yield of a stock could be elevated as the result of a declining stock price.

The corporation should maintain a fair track record when it comes to distributing dividends and paying off debts. The dividend policy of a firm has the effect of dividing its earnings into two major parts: retained earnings and dividends. Retained earnings help to provide funds to finance the firm’s long-term growth. Dividend policy does affect the long-term financing and the wealth of shareholders. Thereby the firm’s decision to pay dividends may be shaped for both a long-term financing decision and a wealth maximization decision. Regularity and stability of dividends is considered as a advisable policy by the management of most companies. Even the shareholders favour such policy and value stable dividends higher than the fluctuating ones.

Some of the best dividend stocks of India are Indian Oil Corporation (IOC), Coal India, Hindutan Zinc Ltd, ITC, Bajaj Auto, GAIL. Hindustan Zinc, SJVN, Hero Motorcorp, REC, Oil India, Mphasis, VST Industries, Petronet LNG, JK Paper, TCS, Torrent Power, Gujarat Pipavav Port, VRL Logistics, NOCIL, Finolex, Infosys, Sun Tv and many more.

You can use ticker and do the fundamental analysis of stocks.

IOC (Indian Oil Corporation)

IOC declared a gross dividend of Rs 12 per share in the financial year 2021 which translates to a yield of 10.4% on current market price (Rs 115). The dividend pay out is expected by the brokerage to remain strong over the financial year of 2022-2023 as well.

Coal India

With a dividend yield of 7.5%, coal india still remains attractively valued. It is expected that Coal India’s profitability to recover sharply in Financial Year 2022 due to the improvement in realizations and recovery in demand. Stock of the state-owned coal behemoth has underperformed the benchmark indices with a return of 18% in the previous year. With an EPS of Rs 20.69, Coal India is trading at a PE ratio of 7.7.

Hindustan Zinc Ltd

The price and demand for zinc and silver remains strong amid a commodities boom which would be beneficial for Hindustan Zinc. A good dividend yield and a 9% CAGR in HZ volumes over the financial year of 2021-2023 is expected which would drive a 19% EBITDA CAGR. This stock has an attractive dividend yield of over 6%.

ITC

Many investors have been disappointed with a return of just 7% in the previous one year, it has an attractive dividend yield of 5%. It is expected that the cigarette-to-hotels major will deliver a dividend yield of 5-6% over the upcoming two years as the company is witnessing a surge in demand for staples, food convenience and health and hygiene products increasing. An EPS of Rs 10.69 the stock is priced at a PE ratio of 19.39.

Oil India

Oil India’s oil and gas production volumes are expected to recover from its five fields going forward. Such midcap PSU stock comes with a dividend yield of 5.7%. it is being said that the stock looks attractive with a strong dividend payout expectation of more than 50%. The stock has given a return of 10% with a market cap of Rs 15,000 crore in the previous one month and 58% in the previous year.

To sum up

One must keep such pointers in mind along with other financial parameters, will help guage a company’s profitability and financial standing effectively. A higher dividend yield return does not mean that you should invest in such a company blindly and not see about its operations and present and future prospects.