You might have been reading in the news about upcoming dividend stocks and high dividend stocks and wondering if you too should invest in one of these high dividend paying stocks. Investment in such stocks has its downsides – let us delve further into this topic by starting with the basics.
What are dividends?
The total benefit that a shareholder gets from the stock ownership is in the form of (i) capital appreciation (i.e. rise in the prices of the shares) and (ii) dividends. Dividends are payments made by companies out of their earnings to shareholders from time to time. They can be made mostly in the form of cash but also as stocks or other property.
What are dividend stocks and why should you invest in one?
A dividend stock is the stock of a company that regularly shares high dividends out of its earnings with its shareholders. If large, profit-making companies, in particular, foresee their stock prices to be stagnant then they try announcing major dividends – it helps satisfy their current shareholders and attracts potential investors, thus boosting the price of the stock. Some companies give dividends more than once per year in the form of final dividends and interim dividends.
Therefore, if there is an upcoming dividend announcement of a company that regularly announces major dividends then you should buy it as you will receive the dividend (by just paying the share price during the purchase) and also probably benefit from capital appreciation in the near future. Finally, a company being able to announce dividends is also a good sign that the company is financially stable and growing.
Before you read further about dividend stocks, it is important that you learn a few financial terms regarding dividends:
- The dividend yield is calculated by dividing the company’s annual cash dividend per share by the current share price. Dividend Yield = Dividend per share / Price per share x 100
- The dividend payout ratio is calculated by dividing the total dividend paid out by the company to its shareholders by the total earnings of the company in that year. Dividend Payout Ratio = Dividends per Share (DPS) / Earnings per Share (EPS)
Keep in mind – A company with stocks that pay dividends at too high a dividend payout ratio (say 50%) may not have adequate funds for reinvestment and expansion – hence try avoiding the stocks of such companies. Therefore high dividend stocks may not always be in your best interest.
The following is a list of some of the highest dividend-paying Indian stocks:
|Name of the Company||Dividend Yield in Past 12 Months||Change in Stock Prices in Past 12 Months|
|INEOS Styrolution India Ltd||34%||-40.28%|
|Union Bank of India||4.13%||1.77%|
INEOS Styrolution India Ltd. –
In the past one year, the company has paid out dividends of ₹297, while its share price is currently at ₹875 – hence it has a dividend yield of almost 34%. Its share price has fallen by 40.28% in the last one year.
Vedanta Ltd. –
The company gave ₹77.5 as dividends in the last one year and its current share price stands at ₹292.55. Therefore it has had a 26.5% dividend yield in the year 2022. However, its stock has largely overall not given much returns, with a fall of 0.85% in the last one year.
Indian Oil Corporation Ltd. –
The dividend yield of the company stands at 16.8% given that it paid a dividend of ₹11.4 in the past twelve months while its current share price stands at ₹67.85. Its stock price, however, has fallen by 22.13% in the last one year.
Rural Electrification Corporation Ltd. –
It is a subsidiary of Power Finance Corporation Ltd. and it gave a dividend of ₹15.3 per share with a current share price of ₹95.75. This means its shareholders enjoy a dividend yield of 16%. In the last 12 months, its stock price has fallen by 19.56%.
Power Finance Corporation Ltd. –
It gave ₹12 per share as dividend and has a current market price of ₹105.9 which makes its dividend yield equal to 11.33%. However, in the last year, its stock price has fallen by 24.88%.
National Mineral Development Corporation Ltd. –
It gave a dividend of ₹14.74 in the last twelve months and its current share price is ₹132.85 which gives its shareholders a dividend yield of around 11.1%. Its stock price has fallen by 8.25% in the past 12 months.
Steel Authority of India Ltd. –
This CPSE stock has given a dividend of ₹8.75 with a current market price of ₹82.3 which gives its shareholders a dividend yield of 10.6%. Its stock price has however fallen by 29.47% in the past 12 months.
Bharat Electronics Ltd. –
This CPSE stock has given a dividend of ₹4.5 per share (each share currently being priced at ₹105.95) thus giving a dividend yield of 4.25%. Even better, its stock price has skyrocketed this year by 54.93% in the last 12 months.
National Thermal Power Corporation –
This is also a CPSE whose stock has given a dividend of ₹7/share which gives its investors a dividend yield of 4.19% at a price of ₹166.95 per share. Its share price has increased by 10.41% in the past 1 year.
Union Bank of India –
The stock has given dividend yield of 4.13% by giving a dividend of ₹1.9 in the past 12 months while the price of the stock is ₹45.95. The stock price has grown by 1.77% in the past year.
Now that you know about the top dividend stocks in India as well as their downsides, try exploring the stock market by opening a demat account online with a trusted online share trading platform. Check the Angel One website if you want to know more about the best dividend paying Indian stocks and upcoming dividend stocks.
Disclaimer: This blog is exclusively for educational purposes. The securities quoted are exemplary and are not recommendatory.